Management and employee buyouts in the context of mass privatization in Romania

The purpose of this research is to present privatization in Romania, and in particular to analyze Management and Employee buyouts as a variety of insider privatization that is unique to Romania. The institutional setting and a short chronology of privatization from 1991 to 1995 is presented. The question of why outsiders consistently pay premiums above book value when acquiring state-owned companies while insiders pay only approximately book value is investigated. Based on the available evidence it is contended that adverse selection prevents uninformed outsiders, foreign companies, and national residents as well, from investing on a large scale in the companies offered for sale. Outsiders are willing to buy the companies only when they have enough information, acquired either from insiders or using their own business skills. It is very likely that outsiders seek investment opportunities rather than assets already in place, because information on assets already in place is relatively more difficult to obtain. When outside investors are interested in taking over a company, they bid up the price and crowd out capital constrained insiders. In the absence of competition from outsiders, book value is the default price, and workers and managers are the only potential buyers. Workers and managers are granted preferential financing from the government in order to acquire state-owned firms. When interpreted in the broader context of mass privatization, this approach might be preferred by the government because it is populist and relatively expedient. When other methods failed to produce satisfactory results in Romania, Management and Employee Buyouts appeared to be the only method that keeps privatization going.

Name thesis:degree_name

Ph. D.

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Finance

Department dc:contributor.department

Finance

Grantor dc:publisher

Virginia Tech

Year dc:date.issued

1996

Author dc:creator

• Valsan, Calin

Chair dc:contributor.committeechair

• Thompson, G. Rodney

Committee members dc:contributor.committeemember

• Chance, Donald M.
• Littlefield, James
• Patterson, Douglas M.
• Tideman, Nicolaus

Statement dc:rights

• In Copyright

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Language dc:language.iso

en

Dc Identifier Other

etd-05112006-154822

OAI identifier oai:identifier

oai:vtechworks.lib.vt.edu:10919/27650