Evidence from the Czech Republic shows that financial incentives and regulation are as important as ownership structure in the design of privatization.Using a new data set on privatized firms in the Czech Republic, Cull, Matesova, and Shirley examine how the design of privatization affects outcomes.Earlier studies of privatization in the Czech Republic focused largely on how the broad distribution of shares through vouchers may have motivated the new owners to strip assets from privatized firms.The authors find evidence for static asset stripping, but also for what Akerlof and Romer (1993) call looting - borrowing heavily with no intent to repay and using the loans for private purposes. This looting occurred because the larger privatized companies had privileged access to credit from state-controlled banks, which had little incentive to enforce debt contracts.The policy implications are significant: financial incentives and regulation are as important as ownership structure in the design of privatization.This paper - a product of Regulation and Competition Policy, Development Research Group - is part of a larger effort in the group to understand the role of financial reform in economic development. The authors may be contacted at [email protected], [email protected], or [email protected].