The Vicious Circles of Control Regional Governments and Insiders in Privatized Russian Enterprises
The Vicious Circles of Control: Regional Governments and Insiders in Privatized Russian Enterprises

In Russia and other transition economies that have implemented voucher privatization programs, how can one account for the puzzling behavior of insider-managers who, in stripping assets from the very firms they own, appear to be stealing from one pocket to fill the other? - How can one account for t...

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Bibliographische Detailangaben
1. Verfasser: Desai, Raj (VerfasserIn)
Format: Elektronisch E-Book
Sprache:English
Veröffentlicht: Washington, D.C The World Bank 2000
Schlagworte:
Banks and Banking Reform
Cash Flows
Competitive Auctions
Conversion
Corporate Governance
Debt Markets
Economic Theory and Research
Emerging Markets
Equity
Finance
Finance and Financial Sector Development
Financial Literacy
Governance
Illiquidity
Investment
Investment and Investment Climate
Investors
Macroeconomics and Economic Growth
Market
Microfinance
Municipal Financial Management
National Governance
Outside Investors
Private Sector Development
Prof Property
Property Rights
Revenue
Revenues
Safety Nets
Tax
Tax Debt
Urban Development
Voucher Privatization
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Zusammenfassung:In Russia and other transition economies that have implemented voucher privatization programs, how can one account for the puzzling behavior of insider-managers who, in stripping assets from the very firms they own, appear to be stealing from one pocket to fill the other? - How can one account for the puzzling behavior of insider-managers who, in stripping assets from the very firms they own, appear to be stealing from one pocket to fill the other? Desai and Goldberg suggest that such asset-stripping and failure to restructure are the consequences of interactions between insiders (manager-owners) and regional governments in a particular property rights regime. In this regime, the ability to realize value is limited by uncertainty and illiquidity, so managers have little incentive to increase value. As the central institutions that rule Russia have ceded their powers to the regions, regional governments have imposed various distortions on enterprises to protect local employment. Prospective outsider-investors doubt they can acquire the control rights they need for restructuring firms and doubt they can avoid the distortions regional governments impose on the firms in which they might invest. The result: little restructuring and little new investment. And regional governments, knowing the firms' taxable cash flows will have been reduced through cash flow diversion, have responded by collecting revenues in kind. To disentangle these vicious circles of control, Desai and Goldberg propose a pilot for transforming ownership in insider-dominated firms through a system of simultaneous tax-debt-for-equity conversion and resale through competitive auctions. The objective: to show regional governments, by example, that a more sustainable way to protect employment is to give managers incentives to increase enterprises' value by transferring effective control to investors.
[Fortsetzung 1. Abstract] The proposed mechanism would provide cash benefits to insiders who agree to sell control to outside investors. The increased cash revenue (rather than in-kind or money surrogates) would enable regional governments to finance safety nets for the unemployed and to promote other regional initiatives. This paper - a product of the Private and Financial Sectors Development Unit, Europe and Central Asia Region - is part of a larger effort in the region to address growth, governance, and poverty in the former Soviet Union. The authors may be contacted at desair@gunet.georgetown.edu or igoldberg@worldbank.org
Beschreibung:Weitere Ausgabe: Desai, Raj ---> The: Vicious Circles of Control
Beschreibung:1 Online-Ressource (1 online resource (28 p.))
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