This paper studies the governance institutions and performance consequences of privatization through management-employee buyout (MEBO) in Romania. Detailed firm-level survey data are used to analyze ownership rights practices concerning voting, dividend payment, and sales of shares, and to study the continued role of the state through restructuring restrictions in the privatization contracts, difficulties in installment payment, and possible renationalization of shares. Comprehensive privatization and registry data are used to estimate the productivity performance of industrial MEBOs, compared with mass transfers to dispersed individuals, sales to domestic and foreign blockholders, and continued ownership by the state. We find that the ownership structure of Romanian MEBOs tends to favor employees rather than managers, their institutional design frequently contains elements of producer cooperatives, they face significant contractual restrictions on restructuring, and there has been only slight "degeneration" in ownership in the years since privatization. Estimates of productivity growth equations imply that MEBOs have clearly out-paced state ownership, while falling short of blockholder ownership.

Issue Date

December 2001


Supported by the Phare ACE Programme of the European Commission

Subject Areas

INTERNATIONAL ISSUES; International labor comparisons; Transition economies




Earle, John S., and Álmos Telegdy. 2001. "Employee Ownership After Privatization: Governance Institutions and Firm Performance in Romania." Report supported by the Phare ACE Programme of the European Commission.