IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/1977.html
   My bibliography  Save this paper

The Problem of Bad Debts: Cleaning Banks' Balance Sheets in Economies in Transition

Author

Listed:
  • Mitchell, Janet

Abstract

Many countries, including economies in transition, have suffered banking crises in recent years. This paper develops a general framework for analysing trade-offs between policies for cleaning banks' balance sheets of bad debt. The framework - a two-tier hierarchy consisting of regulators, banks, and firms - is applied to analyse three types of policies that have been advocated or employed in the economies in transition. Hidden information and moral hazard are present at each tier of the hierarchy. The analysis identifies two types of effects of policy choice: a direct effect of the policy on bank behaviour and an indirect effect on firm behaviour as a reaction to the bank response. Both effects are important determinants of policy trade-offs. The analysis demonstrates that differing policies applied to financially distressed banks have differing real effects on firms' and banks' asset values, even when all firms and banks are state-owned.

Suggested Citation

  • Mitchell, Janet, 1998. "The Problem of Bad Debts: Cleaning Banks' Balance Sheets in Economies in Transition," CEPR Discussion Papers 1977, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1977
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1977
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Max Bruche & Gerard Llobet, 2010. "Walking Wounded or Living Dead? Making Banks Foreclose Bad Loans," Working Papers wp2010_1003, CEMFI.
    2. Paola Dongili & Angelo Zago, 2005. "Bad loans and efficiency in Italian Banks," Working Papers 28/2005, University of Verona, Department of Economics.

    More about this item

    Keywords

    bad debts; banking crises; creditor passivity; economies in transition;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:1977. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.