Privatization, Risk-Taking, and the Communist Firm

Dominique Demougin () and Hans-Werner Sinn

No 743, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This 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.

Keywords: Communist Firm; Eastern Europe; Privatization; Risk-taking (search for similar items in EconPapers)
JEL-codes: D44 P13 (search for similar items in EconPapers)
Date: 1993-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=743 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Privatization, risk-taking, and the communist firm (1994)
Working Paper: Privatization, risk-taking, and the communist firm (1994)
Working Paper: Privatization, Risk Taking and the Communist Firm (1992)
Working Paper: Privatization, Risk-Taking and the Communist Firm (1992)
Working Paper: Privatization, Risk-Taking, and the Communist Firm (1992)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:743

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=743

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().