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The Determinants of Asset Stripping: Theory and Evidence from the Transition Economies

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  • Campos, Nauro F
  • Giovannoni, Francesco

Abstract

During the transition from plan to market, managers and politicians succeeded in maintaining control of large parts of the stock of socialist physical capital. Despite the obvious importance of this phenomenon, there have been no efforts to model, measure, and investigate this process empirically. This paper tries to fill this gap by putting forward theory and econometric evidence. We argue that asset stripping is driven by the interplay between the firm's potential profitability and its ability to influence law enforcement. Our econometric results, for about 950 firms in five transition economies, provide support for this argument.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Law and Economics.

Volume (Year): 49 (2006)
Issue (Month): 2 (October)
Pages: 681-706

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Handle: RePEc:ucp:jlawec:y:2006:v:49:i:2:p:681-706

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  1. Karla Hoff & Joseph E. Stiglitz, 2004. "After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," American Economic Review, American Economic Association, vol. 94(3), pages 753-763, June.
  2. Roland, Gérard & Verdier, Thierry, 2000. "Law Enforcement and Transition," CEPR Discussion Papers 2501, C.E.P.R. Discussion Papers.
  3. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
  4. Blanchard, Olivier & Kremer, Michael, 1997. "Disorganization," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1091-1126, November.
  5. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  6. Campos, Nauro F & Coricelli, Fabrizio, 2002. "Growth in Transition: What we Know, What we Don't and What we Should," CEPR Discussion Papers 3246, C.E.P.R. Discussion Papers.
  7. Konstantin Sonin, 2003. "Why the Rich May Favor Poor Protection of Property Rights," Working Papers w0022, Center for Economic and Financial Research (CEFIR).
  8. Gérard Roland, 2000. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182033, December.
  9. J. Stiglitz, 1999. "Whither Reform? Ten Years of the Transition," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
  10. Cull, Robert & Matesova, Jana & Shirley, Mary, 2002. "Ownership and the Temptation to Loot: Evidence from Privatized Firms in the Czech Republic," Journal of Comparative Economics, Elsevier, vol. 30(1), pages 1-24, March.
  11. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," American Economic Review, American Economic Association, vol. 92(5), pages 1335-1356, December.
  12. Pietro Garibaldi & Nada Mora & Ratna Sahay & Jeromin Zettelmeyer, 2001. "What Moves Capital to Transition Economies?," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 6.
  13. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
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Cited by:
  1. Serguey Braguinsky, 2009. "Postcommunist Oligarchs in Russia: Quantitative Analysis," Journal of Law and Economics, University of Chicago Press, vol. 52(2), pages 307-349, 05.
  2. Campos, Nauro F & Giovannoni, Francesco, 2006. "Lobbying, Corruption and Political Influence," IZA Discussion Papers 2313, Institute for the Study of Labor (IZA).
  3. Koman, Matjaž & Lakičević, Milan & Prašnikar, Janez & Svejnar, Jan, 2013. "Asset Stripping, Rule of Law and Firm Survival: The Hoff-Stiglitz Model and Mass Privatization in Montenegro," IZA Discussion Papers 7821, Institute for the Study of Labor (IZA).
  4. Mykhayliv, Dariya & Zauner, Klaus G., 2013. "Investment behavior and ownership structures in Ukraine: Soft budget constraints, government ownership and private benefits of control," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 265-278.

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