Creative Accounting in Eastern Europe: the Case of the Polish Port Companies

Dariusz Bernacki and Carl Reyns

European Research Studies Journal, 1998, vol. I, issue 2, 49-59

Abstract: During 1991, a large number of small companies was created to run the operational activity of the Polish seaports, which was until then monopolized by state-owned enterprises. The major part of the shares is held by the employees. Leasing-techniques are used to solve the problem of financing the infrastructure. Although the profit-margins are relatively modest, the return on total assets is rather important because the infrastructure does not appear on the assets-side of the privatized companies. As a consequence of what we call leasing-leverage, the return on equity reaches almost astronomic heights. In the conclusion we indicate the potential dangers of this situation; the financial construction does not solve the ownership-problem of the assets, can lead to only very short-term based decisions and does not guarantee continuity when the assets have to be replaced.

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:ers:journl:v:i:y:1998:i:2:p:49-59

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