Does debt discipline state-owned firms? Evidence from a panel of Italian firms
AbstractThis paper investigates whether financial pressure has an impact on the performance of state-owned firms. By combining different theoretical frameworks, we explore the conditions under which debt discipline becomes effective even for state firms. Using a panel of 1318 Italian state and private manufacturing companies, for the period 1977-1993, we estimate total factor productivity and employment equations, allowing the financial factors to have a different effect under "soft" and "hard" budget constraint regimes. Consistent with the theoretical predictions, the results show that state firms do respond to financial pressure by increasing total productivity and reducing employment in a "hard" budget constraint environment.
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Bibliographic InfoPaper provided by Institute for Economic Research on Firms and Growth - Moncalieri (TO) in its series CERIS Working Paper with number 199711.
Length: 43 pages Keywords : debt, high leverage, financial distress, state-owned firms, soft budget constraint, total productivity, employment, panel data, Italian firms
Date of creation: Dec 1997
Date of revision:
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
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