Property Rights Security in Russian Deprivatization

Property Rights Security in Russian Deprivatization

Analyzing Managerial Decisions

Abstract

Transferring ownership from the private sector to the public sector. Also is known as nationalization. Early 90's: Russia private 70.000 state-owned enterprises. Many of the private buyers for these state-owned enterprises were foreign companies and investors.

Late 90's: Due to a weak economy politicians promoted deprivatization which declared previous privatized enterprises as being illegal. The privatization legislation was unclear, so many were unsure as to what would be considered illegal. By deprivatizing companies they will be run as a state-owned or be sold to another party.

Property Rights Security in Russian Deprivatization

What impact will the prospect of deprivatization have on investment by managers of privatized firms?

The prospect of deprivatization will impact managers of privatized firms because under this policy, certain past privatization would be declare illegal and the transactions would be reversed. These privatized firms would have to be either run as a state-owned enterprise or sold to another party.

This will affect managers of privatized firms in that they may not have the power to make decisions on their own, decisions will be made by the state, and this may limit levels of efficiencies in these firms, also the firms may not respond quickly to changing market conditions due to long process of decision making.

The Managers of privatized firms will notice that additional investments will be very risky in terms of potential payback. These managers might make decision considering the higher risks to make investments where depravation occurs. If deprivatization is imposed on firms, private owners lose their entire investment.

The process will impact:

• Loosing the corporate focus;

• Affecting designed managerial objects and strategic efficiency.

• Missing planned CEO turnover;

What effect will the...