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Managerial career concerns, privatization and restructuring in transition economies

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  • Gérard Roland
  • Khalid Sekkat

Abstract

We set up a dynamic adverse selection model to explain how career concerns may induce managers in state-owned enterprises (SOEs) to restructure their firms. It is shown how government monopsony power over managers led to the ratchet effect under the socialist economy, even under reforms coming short of privatization. The introduction of a managerial labour market, through privatization, introduces competition for managers and eliminates the ratchet effect, thereby inducing managers to restructure. Prospects of privatization also provide incentives to restructure even when managerial skills are asset-specific, provided insider control is strong enough to give managers enough rents from privatization. The model is consistent with the empirical evidence on restructuring of SOEs in transition economies.
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(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Gérard Roland & Khalid Sekkat, 2000. "Managerial career concerns, privatization and restructuring in transition economies," ULB Institutional Repository 2013/7340, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/7340
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D29 - Microeconomics - - Production and Organizations - - - Other
    • H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other
    • P29 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Other

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