The restructuring of insider-dominated firms - A comparative analysis

We study the effects of different modalities of privatization to insiders o n the restructuring process in two former Soviet republics - Georgia and Mo ldova using enterprise survey data for 1995-97. Enterprise restructuring wa s similar in companies where incumbent managers received significant owners hip stakes for free and in state-owned companies. In contrast, the restruct uring process was faster in companies bought by their managers. We interpre t these results to suggest that managers' incentives to restructure decreas e when they perceive their newly acquired ownership as a windfall gain.