Insider-controlled firms in Russia

Privatisation Vouchers in Russia were heavily invested in the holders' own firms. Using data from a recent survey, we show that insider control in fir ms privatised in 1992-4 through the voucher process (as distinct from the e arlier leased buy-out method) is insecure and dependent on managers' suppor t. For employees, investment in insider control appears to have been motiva ted by employment income insurance rather than expected excess returns on t he equity. Managers are predominantly the same individuals as before privat isation and display considerable hostility to outside investors, probably b ecause they fear dismissal should outsiders gain control. Despite insider c ontrol, firms are shedding labour quite rapidly through voluntary resignati ons. Employment dynamics appear to be unrelated to insider equity ownership .