Restructuring as a signal: a simple formalization

Emilio Colombo

The Economics of Transition, 2002, vol. 10, issue 1, 119-142

Abstract: Several studies have stressed that, contrary to initial expectations, state‐owned firms at the beginning of the transition undertook painful measures to adjust to the new economic environment. This paper investigates this behaviour in a simple game theoretic framework. It is argued that the massive amount of lay‐offs created by state‐owned firms during the initial phase of the 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. JEL classification: P31, C72.

Date: 2002
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https://doi.org/10.1111/1468-0351.00105

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Working Paper: Restructuring as a Signal: A Simple Formalization (1999)
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