Investment, Credit Rationing and the Soft Budget Constraint: Evidence from Czech Panel Data
AbstractStrategic restructuring of firms through investment is key to a transition from plan to market. Using data on industrial firms in the Czech Republic during 1992-98, we find that (a) foreign owned companies invest the most and cooperatives the least, (b) private firms do not invest more than state-owned ones and (c) cooperatives and small firms are credit rationed. Given the large volume of non-performing bank loans to firms and the high rate of investment of large state owned and private firms, our findings also suggest that these firms operate under a soft budget constraint. Estimates of a dynamic model, together with the support for the neoclassical model, suggest that firms started to behave consistently with profit-maximization.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 363.
Date of creation: 01 Feb 2001
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Investment; restructuring; credit rationing; soft budget constraint; ownership; legal status; transition to a market economy;
Other versions of this item:
- Lubomír Lízal & Jan Svejnar, 2002. "Investment, Credit Rationing, And The Soft Budget Constraint: Evidence From Czech Panel Data," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 353-370, May.
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-09-26 (All new papers)
- NEP-EEC-2001-09-26 (European Economics)
- NEP-MFD-2001-09-26 (Microfinance)
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