Investment, Credit Rationing and the Soft Budget Constraint: Evidence from Czech Panel Data
Lubomir Lizal and
Jan Svejnar ()
No 363, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan
Strategic restructuring of firms through investment is key to a transition from plan to market. Using data on industrial firms in the Czech Republic during 1992-98, we find that (a) foreign owned companies invest the most and cooperatives the least, (b) private firms do not invest more than state-owned ones and (c) cooperatives and small firms are credit rationed. Given the large volume of non-performing bank loans to firms and the high rate of investment of large state owned and private firms, our findings also suggest that these firms operate under a soft budget constraint. Estimates of a dynamic model, together with the support for the neoclassical model, suggest that firms started to behave consistently with profit-maximization.
Keywords: Investment; restructuring; credit rationing; soft budget constraint; ownership; legal status; transition to a market economy (search for similar items in EconPapers)
JEL-codes: D21 D92 E22 G32 P21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mfd
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Journal Article: Investment, Credit Rationing, And The Soft Budget Constraint: Evidence From Czech Panel Data (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:wdi:papers:2001-363
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