Privatization, Risk-Taking, and the Communist Firm
AbstractThis paper studies alternative methods of privatizing a formerly communist firm in the presence of imperfect risk markets. The methods include cash sales, a give-away scheme, and a participation contract where the government retains a sleeping fractional ownership in the firm. It is shown that, with competitive bidding, the participation contract dominates cash sales because it generates both more private restructuring investment and a higher expected present value of revenue for the government. Under weak conditions, the participation contract will induce more investment than the giveaway scheme, and it may even share the cash sales' virtue of incentive compatibility.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4205.
Date of creation: Mar 1995
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Demougin, Dominique & Sinn, Hans-Werner, 1994. "Privatization, risk-taking, and the communist firm," Journal of Public Economics, Elsevier, vol. 55(2), pages 203-231, October.
- Dominique Demougin & Hans-Werner Sinn, 1992. "Privatization, Risk-Taking and the Communist Firm," Cahiers de recherche du DÃ©partement des sciences Ã©conomiques, UQAM 9216, Université du Québec à Montréal, Département des sciences économiques.
- Demougin, Dominique & Sinn, Hans-Werner, 1993. "Privatization, Risk-Taking, and the Communist Firm," CEPR Discussion Papers 743, C.E.P.R. Discussion Papers.
- P13 - Economic Systems - - Capitalist Systems - - - Cooperative Enterprises
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jeremy I. Bulow & Lawrence H. Summers, 1984.
"The Taxation of Risky Assets,"
NBER Working Papers
0897, National Bureau of Economic Research, Inc.
- Ahsan, Syed M, 1974. "Progression and Risk-Taking," Oxford Economic Papers, Oxford University Press, vol. 26(3), pages 318-28, November.
- Stiglitz, Joseph E, 1974.
"Incentives and Risk Sharing in Sharecropping,"
Review of Economic Studies,
Wiley Blackwell, vol. 41(2), pages 219-55, April.
- Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
- Chen, Chien-Hsun & Mai, Chao-Cheng & Liu, Yu-Lin & Mai, Shin-Ying, 2009. "Privatization and optimal share release in the Chinese banking industry," Economic Modelling, Elsevier, vol. 26(6), pages 1161-1171, November.
- Maw, James, 2002. "Partial privatization in transition economies," Economic Systems, Elsevier, vol. 26(3), pages 271-282, September.
- Patrick Paul Walsh & Ciara Whelan, 2000.
"Firm Performance and the Political Economy of Corporate Governance: Survey Evidence for Bulgaria, Hungary, Slovakia and Slovenia,"
William Davidson Institute Working Papers Series
338, William Davidson Institute at the University of Michigan.
- Walsh, Patrick Paul & Whelan, Ciara, 2001. "Firm performance and the political economy of corporate governance: survey evidence for Bulgaria, Hungary, Slovakia and Slovenia," Economic Systems, Elsevier, vol. 25(2), pages 85-112, June.
- Patrick Paul Walsh & Ciara Whelan, 1999. "Firm Performance and the Political Economy of Corporate Governance: Survey Evidence for Bulgaria, Hungary, Slovakia and Slovenia," LICOS Discussion Papers 8599, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
- Bennett, John & Estrin, Saul & Maw, James, 2007. "The choice of privatization method in a transition economy when insiders control a firm," European Journal of Political Economy, Elsevier, vol. 23(3), pages 806-819, September.
- Bennett, John & Maw, James, 2000.
"Privatisation and market structure in a transition economy,"
Journal of Public Economics,
Elsevier, vol. 77(3), pages 357-382, September.
- John Bennett & James Maw, 1998. "Privatisation and Market Structure in a Transition Economy," William Davidson Institute Working Papers Series 175, William Davidson Institute at the University of Michigan.
- Hans-Werner Sinn & Alfons J. Weichenrieder, 1997. "Foreign direct investment, political resentment and the privatization process in eastern Europe," Economic Policy, CEPR & CES & MSH, vol. 12(24), pages 177-210, 04.
- Bennett, John & Maw, James, 2003. "Privatization, partial state ownership, and competition," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 58-74, March.
- Banerji, Sanjay & Errunza, Vihang R., 2005. "Privatization under incomplete information and bankruptcy risk," Journal of Banking & Finance, Elsevier, vol. 29(3), pages 735-757, March.
- Pennings, Enrico, 2008. "Privatization of real options," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 489-497, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.