This paper investigates the evolution of corporate governance and firm perfor-mance in transition economies. It focuses on barriers that impeded adoption of optimal corporate governance at Czech ammunition manufacturer Sellier and Bellot (S&B) following voucher privatisation in 1993. Exogenously imposed dif-fuse ownership, combined with legal, capital market, and accounting deficiencies, contributed to poor corporate governance and weak firm performance. This study shows how legal, capital market, and accounting deficiencies hinder corporate governance evolution; it demonstrates monitoring and incentive mechanisms can create value in transition economies; it suggests effective privatisation not only involves rapid ownership transfer but careful accounting and securities regulation and legal protection.
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