Determinants of Financial Distress: What Drives Bankruptcy in a Transition Economy? The Czech Republic Case

Lubomir Lizal

No 451, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: The main factors influencing the probability of bankruptcy are analyzed on Czech Republic 1993-1999 firm data. Basic models of the bankruptcy are compared: neoclassical, financial and corporate governance. The corporate governance hypothesis does not receive support in the ownership but the indicator of voucher privatization supports it. The initial conditions from early 90's were not the driving the financial distress. The voucher-scheme privatization results in poorer corporate governance. These firms are more likely to go bankrupt, ceteris paribus. On the other hand, former large SOEs are less likely to bankrupt than firms with a similar debt structure - this is an evidence of soft budget constraints.

Keywords: Banking and Finance; Corporate Governance; Privatization; Czech Republic; bankruptcy; privatization; soft budget constraint; financial distress (search for similar items in EconPapers)
JEL-codes: G33 G34 K2 P21 P31 P34 (search for similar items in EconPapers)
Pages: pages
Date: 2002-01-01
New Economics Papers: this item is included in nep-ent and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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