Will Czech Trains Ever Reach Their Destinations Efficiently?

Independent Review, Vol. 14, No. 2, pp. 271-287, 2009

17 Pages Posted: 31 Oct 2010 Last revised: 5 May 2011

See all articles by Tomáš Otáhal

Tomáš Otáhal

Mendel University - Faculty of Economics and Business Administration

Tomáš Pospíšil

affiliation not provided to SSRN

Date Written: September 17, 2008

Abstract

Soft budget constraint (SBC) syndrome theory aptly explains the inefficient operations of the Czech railway industry with reference to České Dráhy (CD). The theory states that the existing organizational structures need to be destroyed to bring about creative competition in the Czech railways and that owners' responsibility for their property get affected if they do not have to bear losses. CD's decision makers tried to persuade control authorities to derive the maximum amount of subsidies and state-guaranteed loans, which indicate that the company suffers from the SBC syndrome. CD has founded many daughter companies in the past eight years, which are under no constraint to perform as they treat CD as a big company. Officials in Správa Železniční (SZDC) and CD feel that the state will never let them fail and have incurred huge loan debts.

Keywords: Czech railways, network industry, soft budget constraint

JEL Classification: D42, G14, H21, L92

Suggested Citation

Otáhal, Tomáš and Pospíšil, Tomáš, Will Czech Trains Ever Reach Their Destinations Efficiently? (September 17, 2008). Independent Review, Vol. 14, No. 2, pp. 271-287, 2009, Available at SSRN: https://ssrn.com/abstract=1699868

Tomáš Otáhal (Contact Author)

Mendel University - Faculty of Economics and Business Administration ( email )

Staňkova 578/16b
Brno, 602 00
Czech Republic

Tomáš Pospíšil

affiliation not provided to SSRN ( email )

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