Case Assignment 3
Case Assignment- Chapter Three
Analyzing Managerial Decisions: Property Right Security in Russian Deprivatization
Tina Crawn
1
1 What impact will the prospect of deprivatization have on investment by managers of privatized firms?
The prospect of deprivatization will have a negative impact on investments by managers of privatized firms. If the government decides for whatever reason they want to come up with that the sale was not legal, the transaction of the sale would be reversed. The managers of these firms mat get their initial investment returned but what about all the other costs they may have incurred since acquiring the business? With no set legislation to incorporate whether a privatization may be reversed, managers may not choose to invest into companies that may be lost to them eventually anyway.
2 What effect will deprivatization have on foreign investment in Russia?
Investments in Russia will decline drastically if investors are going to have to be concerned with a company they are trying to buy becoming deprivatized. The investors won’t want to waste their time and money on a project that may be revoked or never even go through. The investors can choose to invest in companies in other countries who do not have deprivatized legislation and will therefore hurt the overall economy of Russia. With no rhyme or reason to reversing privatizations, investors will not want to take the risk.
3 Do you think that mass deprivatization is in the long-run best interests of Russia?
I think deprivatization is not in the best interest of Russia in the long run. Privatization was initially started to help the economy grow and bring outside funds into Russia. It gave more options to companies for expansion and growth including creating more jobs and better pay. If the country decides to deprivatize, all business would go back to government control and therefore limit growth and development. It would also
Analyzing Managerial Decisions: Property Right Security in Russian Deprivatization
Tina Crawn
1
1 What impact will the prospect of deprivatization have on investment by managers of privatized firms?
The prospect of deprivatization will have a negative impact on investments by managers of privatized firms. If the government decides for whatever reason they want to come up with that the sale was not legal, the transaction of the sale would be reversed. The managers of these firms mat get their initial investment returned but what about all the other costs they may have incurred since acquiring the business? With no set legislation to incorporate whether a privatization may be reversed, managers may not choose to invest into companies that may be lost to them eventually anyway.
2 What effect will deprivatization have on foreign investment in Russia?
Investments in Russia will decline drastically if investors are going to have to be concerned with a company they are trying to buy becoming deprivatized. The investors won’t want to waste their time and money on a project that may be revoked or never even go through. The investors can choose to invest in companies in other countries who do not have deprivatized legislation and will therefore hurt the overall economy of Russia. With no rhyme or reason to reversing privatizations, investors will not want to take the risk.
3 Do you think that mass deprivatization is in the long-run best interests of Russia?
I think deprivatization is not in the best interest of Russia in the long run. Privatization was initially started to help the economy grow and bring outside funds into Russia. It gave more options to companies for expansion and growth including creating more jobs and better pay. If the country decides to deprivatize, all business would go back to government control and therefore limit growth and development. It would also