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

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  • Nauro F. Campos

    ()

  • Francesco Giovannoni

    ()

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

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp786.

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Length: pages
Date of creation: 01 Aug 2005
Date of revision:
Handle: RePEc:wdi:papers:2005-786

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Keywords: Asset stripping; law enforcement; corruption; transition.;

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  1. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
  2. Blanchard, O & Kremer, M, 1996. "Disorganization," Working papers 96-30, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," NBER Working Papers 8852, National Bureau of Economic Research, Inc.
  4. Karla Hoff & Joseph E. Stiglitz, 2002. "After the Big Bang? Obstacles to the emergence of the rule of law in post-communist societies," Discussion Papers 0203-03, Columbia University, Department of Economics.
  5. Konstantin Sonin, 2002. "Why the Rich May Favor Poor Protection of Property Rights," William Davidson Institute Working Papers Series 544, William Davidson Institute at the University of Michigan.
  6. 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.
  7. 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.
  8. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  9. Gérard Roland, 2000. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182033.
  10. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
  11. Roland, Gerard & Verdier, Thierry, 2003. "Law enforcement and transition," European Economic Review, Elsevier, vol. 47(4), pages 669-685, August.
  12. J. Stiglitz, 1999. "Whither Reform? Ten Years of the Transition," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
  13. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
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Cited by:
  1. 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).
  2. Campos, Nauro F & Giovannoni, Francesco, 2006. "Lobbying, Corruption and Political Influence," CEPR Discussion Papers 5886, C.E.P.R. Discussion Papers.
  3. 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.
  4. 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.

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