IDEAS home Printed from https://ideas.repec.org/p/lmu/muenar/3109.html
   My bibliography  Save this paper

Privatization and Management Incentives in the Transition Period in Eastern Europe

Author

Listed:
  • Schmidt, Klaus M.
  • Schnitzer, Monika

Abstract

The paper develops a simple theoretical framework in which the impact of different governance structures on management incentives, the efficiency of restructuring, and the social costs of the adjustment process in the transition period in Eastern Europe can be analyzed. The model shows that immediate privatization leads not only to strong management incentives to restructure but also to high social costs of bankruptcies and layoffs. If the government stays in control social costs will be lower. However, in this case managers face a soft budget constraint and have less incentive to restructure. The model also suggests which companies should be privatized first. J. Comp. Econom., June 1993, 17(2), pp 964-287. University of Bonn, D-531 13 Bonn, Germany.

Suggested Citation

  • Schmidt, Klaus M. & Schnitzer, Monika, 1993. "Privatization and Management Incentives in the Transition Period in Eastern Europe," Munich Reprints in Economics 3109, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:3109
    as

    Download full text from publisher

    File URL: https://epub.ub.uni-muenchen.de/3109/1/2.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David E. M. Sappington & Joseph E. Stiglitz, 1987. "Privatization, information and incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 567-585.
    2. Schnitzer, Monika, 1995. ""Breach of Trust" in Takeovers and the Optimal Corporate Charter," Journal of Industrial Economics, Wiley Blackwell, vol. 43(3), pages 229-259, September.
    3. Sinn, Hans-Werner, 1992. "Privatization in East Germany," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 152-171.
    4. Andrei Shleifer & Lawrence H. Summers, 1988. "Breach of Trust in Hostile Takeovers," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 33-68, National Bureau of Economic Research, Inc.
    5. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Privatization and Incentives," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 84-105, Special I.
    6. Schaffer, Mark E., 1989. "The credible-commitment problem in the center-enterprise relationship," Journal of Comparative Economics, Elsevier, vol. 13(3), pages 359-382, September.
    7. Eduardo Borensztein & Manmohan S. Kumar, 1991. "Proposals for Privatization in Eastern Europe," IMF Staff Papers, Palgrave Macmillan, vol. 38(2), pages 300-326, June.
    8. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    9. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
    10. Jean Tirole, 1991. "Privatization in Eastern Europe: Incentives and the Economics of Transition," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 221-268, National Bureau of Economic Research, Inc.
    11. Stanley Fischer, 1991. "Privatization in East European Transformation," NBER Working Papers 3703, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bottasso, Anna & Conti, Maurizio, 2003. "Cost Inefficiency in the English and Welsh Water Industry: An Heteroskedastic Stochastic Cost Frontier Approach," Economics Discussion Papers 8872, University of Essex, Department of Economics.
    2. Carlos Suarez, 2021. "Private management and strategic bidding behavior in electricity markets: Evidence from Colombia," IREA Working Papers 202102, University of Barcelona, Research Institute of Applied Economics, revised Jan 2021.
    3. Alberto Cavaliere & Simona Scabrosetti, 2008. "Privatization And Efficiency: From Principals And Agents To Political Economy," Journal of Economic Surveys, Wiley Blackwell, vol. 22(4), pages 685-710, September.
    4. Bushman, Robert M. & Smith, Abbie J., 2001. "Financial accounting information and corporate governance," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 237-333, December.
    5. Florencio López-de-Silanes, 1997. "Determinants of Privatization Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 965-1025.
    6. Suarez, Carlos, 2022. "Private management and strategic bidding behavior in electricity markets: Evidence from Colombia," Energy Economics, Elsevier, vol. 111(C).
    7. Ernesto Crivelli & Klaas Staal, 2010. "Nationalizations and Efficiency," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(2), pages 239-240, May.
    8. Jean-François Nivet, 1994. "La privatisation en Pologne : d'une approche plurielle aux difficultés de la privatisation de masse," Économie et Statistique, Programme National Persée, vol. 279(1), pages 121-133.
    9. Anusha Chari & Peter Blair Henry & Hector Reyes, 2020. "The Baker Hypothesis," NBER Working Papers 27708, National Bureau of Economic Research, Inc.
    10. Fluck, Zsuzsanna & John, Kose & Abraham Ravid, S., 1996. "Privatizing in stages and the dynamics of ownership structure," Pacific-Basin Finance Journal, Elsevier, vol. 4(2-3), pages 277-296, July.
    11. MARINI, Marco, 1996. "Property Rights and Market : Employee Privatization as a Cooperative Bargaining Process," LIDAM Discussion Papers CORE 1996023, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    12. Heinrich, Ralph P., 1999. "Complementarities in Corporate Governance - A Survey of the Literature with Special Emphasis on Japan," Kiel Working Papers 947, Kiel Institute for the World Economy (IfW Kiel).
    13. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    14. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.
    15. Anastassios Gentzoglanis, 2002. "Privatization, Investment and Efficiency in the Telecommunications Industry: Theory and Empirical Evidence from MENA Countries," Working Papers 0230, Economic Research Forum, revised 10 Oct 2002.
    16. Elisabetta Iossa & David Martimort, 2012. "Risk allocation and the costs and benefits of public--private partnerships," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 442-474, September.
    17. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    18. Brian Bell & Simone Pedemonte & John Van Reenen, 2021. "Ceo Pay and the Rise of Relative Performance Contracts: A Question of Governance?," Journal of the European Economic Association, European Economic Association, vol. 19(5), pages 2513-2542.
    19. Maug, Ernst, 1997. "Boards of directors and capital structure: Alternative forms of corporate restructuring," Journal of Corporate Finance, Elsevier, vol. 3(2), pages 113-139, April.
    20. Adams, Christopher P., 2006. "Optimal team incentives with CES production," Economics Letters, Elsevier, vol. 92(1), pages 143-148, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lmu:muenar:3109. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tamilla Benkelberg (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.