Restructuring as a Signal: A Simple Formalization

Emilio Colombo

No 2227, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Several studies stressed that contrary to initial expectations, state-owned firms at the beginning of transition undertook painful measures to adjust to the new economic environment. This Paper investigates this behaviour in a simple game, a theoretic framework. It is argued that the massive amount of lay-offs created by state-owned firms during the initial phase of transition can be interpreted as a signal directed to the banking sector in order to obtain more favourable financing conditions for the subsequent process of restructuring. The conclusions are strongly supported by Polish firm level empirical evidence.

Keywords: Restructuring; Signalling; Transitional Economy (search for similar items in EconPapers)
JEL-codes: C72 P31 (search for similar items in EconPapers)
Date: 1999-09
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Journal Article: Restructuring as a signal: a simple formalization (2002)
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