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Can State-owned Banks Promote Enterprise Restructuring? Evidence from One Polish Bank's Experience

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Author Info
John P. Bonin, Bozena Leven
Abstract

In this paper, we take a detailed look at one Polish bank's experiences with financial sector reforms focusing on a bank-led enterprise-restructuring plan that linked directly bank privatization and recapitalization to bad-debt workouts. Based on personal interviews and original statistical data, we evaluate the performance of Bank Depozytowo-Kredytowy (BDK) in promoting financial and operational restructuring of its clients. We found that BDK continued to provide soft lending to keep four old military–industrial companies afloat and actually increased its exposure to these companies during the program. The five success stories among BDK's clients were companies that had external agents other than the bank promoting and monitoring their operational restructuring. From our case study of BDK, we conclude that, while banks may play a role in financial restructuring of their clients, their ability to affect operational restructuring is quite limited. Moreover, stateowned banks are particularly vulnerable to incentive problems when dealing with large state-owned enterprises that may be too big or too political to fail.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Post-Communist Economies.

Volume (Year): 13 (2001)
Issue (Month): 4 (December)
Pages: 431-443
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Handle: RePEc:taf:pocoec:v:13:y:2001:i:4:p:431-443

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. van Wijnbergen, Sweder, 1997. "On the Role of Banks in Enterprise Restructuring: The Polish Example," Journal of Comparative Economics, Elsevier, vol. 24(1), pages 44-64, February. [Downloadable!] (restricted)
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  2. Stijn Claessens & Simeon Djankov, 1999. "Ownership Concentration and Corporate Performance in the Czech Republic," William Davidson Institute Working Papers Series 227, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  3. Andrew Weiss & Georgiy Nikitin, 1998. "Performance of Czech Companies by Ownership Structure," Boston University - Institute for Economic Development 85, Boston University, Institute for Economic Development.
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  4. Djankov, Simeon, 1999. "The Enterprise Isolation Program in Romania," Journal of Comparative Economics, Elsevier, vol. 27(2), pages 281-293, June. [Downloadable!] (restricted)
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  5. Corbett, Jenny & Mayer, Colin, 1991. "Financial Reform in Eastern Europe: Progress with the Wrong Model," Oxford Review of Economic Policy, Oxford University Press, vol. 7(4), pages 57-75, Winter.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Olaf Unteroberdoerster, 2004. "Banking Reform in the Lower Mekong Countries," IMF Policy Discussion Papers 04/5, International Monetary Fund. [Downloadable!]
  2. Paul Wachtel & John Bonin, 2004. "Dealing with Financial Fragility in Transition Economies," Working Papers 04-31, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  3. Bonin, John & Wachtel, Paul, 2004. "Dealing with financial fragility in transition economies," BOFIT Discussion Papers 22/2004, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
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