EconPapers    
Economics at your fingertips  
 

The Failure of Government-led Program of Corporate Reorganization in Romania

Simeon Djankov () and Kosali Ilayperuma

No 139, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We provide the first comprehensive cost-benefit analysis of government-led reorganization programs for financially distressed firms in transition economies. The study is based on empirical evidence on the programs in Albania, Arinenia, Bulgaria, FYR Macedonia, Romania, Kazakhstan, Kyrgyz Republic, and Uzbekistan, with a particular focus on the Romanian program which is the only completed program to date. Our results indicate that the reorganization program failed to deliver any tangible improvements in the operational performance of firms. We also show that firms included in the program were faced with softer budget constraints than their comparators outside the program. Finally, we show that the cost of the program equaled three years of salaries for all workers in reorganized firms. The use of this money as severance pay for workers may have eliminated the pressure for government support and made it easier to liquidate or privatize firms. These findings question the feasibility for creating workable reorganization programs under government auspices.

Keywords: bankruptcy; transition economies; financial discipline (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 1997-09-01
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://deepblue.lib.umich.edu/bitstream/handle/2027.42/39529/wp139.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wdi:papers:1997-139

Access Statistics for this paper

More papers in William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109. Contact information at EDIRC.
Bibliographic data for series maintained by WDI ().

 
Page updated 2019-12-06
Handle: RePEc:wdi:papers:1997-139