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Understanding Privatization and Financial Systems: A Comparative Analysis

This paper explores the dynamics of asset demand and supply during privatization, analyzing the costs and benefits associated with various privatization methods, including restitution, auctions, buyouts, and vouchers. It contrasts market-based and institution-based financial systems, focusing on the differences between the German-Japanese and Anglo-American models. Key distinctions include ownership concentration, funding sources, and the role of banks in financing. The study highlights how these factors impact corporate independence and funding strategies, with implications for economic transitions.

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Understanding Privatization and Financial Systems: A Comparative Analysis

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  1. PRIVATIZATION AND FINANCIAL SYSTEM • Demand for and supply of assets during privatization • Costs and benefits of different ways of privatization • restitution • auctioning • managers’ and employees’ buyouts • vouchers • Market-based versus institution-based financial system • Banking and financial system in transition

  2. German-Japanese versus Anglo-American financial system • First, in Japan, Germany and other continental European countries several major shareholders, normally banks, typically hold a substantial portion of total equity, whereas in Britain, U.S. and Canada stock ownership is much more dispersed. • Second, in Anglo-American system corporations rely more on internal sources of funds, and hence are more independent from large banks • Third, the share of external financing provided by banks is usually greater in continental Europe and Japan, whereas American companies derive more funds from sales of securities. • Fourth, banking system in the U.S. is much less concentrated than in all other Western countries, where it is dominated by "big three" or "big five" largest banks.

  3. Bank credits go to declining industries

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