Political objectives and privatization decisions

Abstract

In early Romanian privatization a group of firms was explicitly banned from privatization. We use this institutional feature to test which factors contributed to the selection of firms for long‐term state ownership, and find that politicians sheltered from privatization large and inefficient firms which paid low wages and had high overdue payments. These results are consistent with minimization of employment losses, even if efficiency enhancement of privatization had to be sacrificed. We conjecture that the unfavourable economic conditions bringing large employment losses motivated Romanian politicians to fear the possible negative employment effects of privatization.

The relative performance of foreign-owned subsidiaries and domestic companies

“…Thus a decline in employment may follow when the acquired companies are undergoing restructuring. Several studies found that employment in privatised firms usually falls, although in one study, jobs were saved when MNEs acquired ailing domestic firms (Szentpeteri & Telegdy, 2012;UNCTAD, 2004). Furthermore, acquisition oriented FDI could have adverse effects when MNEs close down acquired firms.…”