Desai, Raj M.Goldberg, Itzhak2014-02-102014-02-102001-10The World Bank Research Observerhttps://hdl.handle.net/10986/16980Russia and other countries in the commonwealth of independent states that have implemented voucher privatization programs have to account for the puzzling behavior of insiders manager-owners-who, in stripping assets from the firms they own, appear to be stealing from one pocket to fill the other. This article suggests that asset stripping and the absence of restructuring result from interactions between insiders and subnational governments in a particular property rights regime, in which the ability to realize value is limited by uncertainty and illiquidity. As the central institutions that govern the Russian economy have ceded their powers to the provinces, regional and local governments have imposed a variety of distortions on enterprises to protect local employment. To disentangle these vicious circles of control, this article considers three sets of institutional changes: adjustments to the system of fiscal federalism by which subnational governments would be allowed to retain tax revenues generated locally; legal improvements in the protection of property rights; and the provision of mechanisms for restructuring and ownership transformation in insider-dominated firms. The aim of these reforms would be to change the incentives that local governments, owners, and investors face; to convince subnational governments that a more sustainable way of protecting employment lies in protecting local investment; to raise the cost of theft and corruption by insiders and local officials; and to allow investors to acquire controlling stakes in viable firms.en-USCC BY-NC-ND 3.0 IGOACCOUNTINGACCOUNTS RECEIVABLESACCUMULATION OF ARREARSADJUDICATIONADMINISTRATIVE COURTSARBITRAGEARREARSASSET STRIPPINGASSETSAUCTIONAUCTIONSBAILIFFBAILIFFSBALANCE SHEETSBANK ACCOUNTSBANK CREDITBANK LOANSBANKRUPTBANKRUPT FIRMBANKRUPTCIESBANKRUPTCYBANKRUPTCY PETITIONBANKRUPTCY PROCEDURESBANKRUPTCY PROCEEDINGSBANKRUPTCY RULESBENEFICIARIESBENEFICIARYBEQUESTBIDBIDSBROKERAGEBROKERAGESBROKERSBUDGET CONSTRAINTSBUDGETINGCAPITAL GAINSCAPITAL MARKETSCASH FLOWCASH FLOWSCASH PAYMENTSCASH TRANSACTIONSCHECKSCIVIL CODESCLAIMCLAIMANTSCLAIMS AGAINST PROPERTYCLASS ACTIONCOLLATERALCOMPANY LAWCOMPETITIVE AUCTIONSCONCENTRATION OF OWNERSHIPCONFLICTS OF INTERESTCORPORATE GOVERNANCECORPORATE LAWSCORPORATE OWNERSHIPCORRUPTIONCOURT COSTSCOURT PROCEEDINGSCREDIBILITYCREDITORCREDITOR COORDINATIONCREDITORSCREDITSDEBT COLLECTIONDEBT CONCILIATIONDEBT CRISISDEBTORDEBTOR COMPANIESDEBTORSDEBTSDECENTRALIZATIONDEPENDENTDISCLOSURE REQUIREMENTSDIVIDENDSECONOMIC REFORMENFORCEMENT MECHANISMSENTERPRISE ARREARSENTERPRISE DEBTSENTERPRISE OPERATIONSENTERPRISE REFORMENTERPRISE RESTRUCTURINGEQUITABLE TREATMENTEQUITY CONVERSIONEQUITY SHARESESTATEEXISTING LAWSEXPENDITUREEXPENDITURESEXPROPRIATIONEXTERNAL INVESTORSFEDERAL BUDGETSFINANCIAL CRISISFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIARIESFINANCIAL SECTOR DEVELOPMENTFINANCIERSFISCAL DECENTRALIZATIONFORBEARANCEFOREIGN COMPANIESFOREIGN DIRECT INVESTMENTFOREIGN INVESTORSFORFEITUREFRAUDFREE MARKETSGOVERNANCE STRUCTUREGOVERNANCE SYSTEMGOVERNMENT INTERVENTIONGROSS DOMESTIC PRODUCTHARD BUDGETHOLDINGHOLDING COMPANIESHOLDING COMPANYHOLDINGSILLIQUIDITYIMPLICIT SUBSIDYINCOME STREAMSINCUMBENT MANAGERSINCUMBENT OWNERSINFLATIONINSIDER TRADINGINSOLVENCYINSOLVENTINSOLVENT COMPANIESINSOLVENT FIRMINSOLVENT FIRMSINSTITUTIONAL ARRANGEMENTSINSTITUTIONAL REFORMSINSTRUMENTINTERNATIONAL BANKINTERNATIONAL FINANCIAL INSTITUTIONINTERNATIONAL MARKETSINVESTMENT CLIMATEINVESTMENT CONTRACTSINVESTMENT DECISIONSINVESTMENT FUNDSINVESTMENT VEHICLESINVESTOR PROTECTIONIPOJOINT STOCK COMPANIESJOINT-STOCK COMPANIESJUDICIAL DECISIONSJUDICIAL INDEPENDENCEJUDICIAL REVIEWJUDICIAL SYSTEMJUDICIARYLABOR MARKETSLAND PRIVATIZATIONLEGAL ENVIRONMENTLEGAL RECOURSESLEGAL SYSTEMLENDERSLEVERAGELEVIESLIQUIDATIONLOANLOCAL GOVERNMENTSLOCAL INVESTORSLOSS-MAKINGLOSS-MAKING ENTERPRISESMAJOR CREDITORSMARKET ECONOMIESMARKET MECHANISMSMARKET PARTICIPANTSMERGERSMULTILATERAL LENDERNONPAYMENTNONVIABLE ENTERPRISESNOTARIESOUTSIDE INVESTORSOWNERSHIP RIGHTSOWNERSHIP STRUCTUREPATRON-CLIENT RELATIONSHIPSPAYMENT OF DIVIDENDSPOLITICAL ECONOMYPOTENTIAL DEBTPRIVATE PROPERTYPRIVATIZATION LAWPROCUREMENTPROFIT-SHARINGPROMISSORY NOTESPROPERTY RIGHTSPROPERTY RIGHTS ENFORCEMENTPROPERTY TAXPROTECTION OF MINORITY SHAREHOLDERSPROTECTION OF PROPERTYPUBLIC DEBTSREINVESTMENTREORGANIZATIONRETURNRETURNSRIGHT OF APPEALRIGHTS OF APPEALRULE OF LAWSALE OF ASSETSSECONDARY MARKETSSECURITIESSECURITIES MARKETSECURITIES MARKET DEVELOPMENTSETTLEMENTSSHARE CAPITALSHARE IN OWNERSHIPSHAREHOLDERSHAREHOLDER RIGHTSSHAREHOLDERSSOFT BUDGET CONSTRAINTSSTOCKSSUPERVISORY BOARDSSUPERVISORY POWERSTAXTAX ARREARSTAX COLLECTIONSTAX DEBTTAX DEBTSTAX REVENUETAX REVENUESTAX TREATMENTTHREAT OF BANKRUPTCYTITLESTRADE CREDITTRADE UNIONTRADE UNIONSTRANSACTIONTRANSFER AGENTSTRANSITION COUNTRIESTRANSITION ECONOMIESTRANSPARENCYTURNOVERUNENFORCEABILITYVALUATIONVALUATIONSVOUCHER PRIVATIZATIONJournal ArticleWorld Bank10.1596/16980