Employee Ownership after Privatization: Governance Institutions and Firm Performance in Romania

Authors

John S. Earle, W.E. Upjohn Institute for Employment ResearchFollow
Álmos Telegdy, Central European UniversityFollow

Issue Date

December 20, 2001

Abstract

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.

Sponsorship

Supported by the Poland and Hungary: Aid for Restructuring of the Economies (PHARE) Action for Cooperation in Economics (ACE) Programme of the European Commission

Subject Areas

INTERNATIONAL ISSUES; International labor comparisons; Transition economies