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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. J. Stiglitz, 1999. "Whither Reform? Ten Years of the Transition," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
  2. 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.
  3. 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.
  4. Roland, Gerard & Verdier, Thierry, 2003. "Law enforcement and transition," European Economic Review, Elsevier, vol. 47(4), pages 669-685, August.
  5. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  6. 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.
  7. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
  8. Olivier Blanchard & Michael Kremer, 1997. "Disorganization," William Davidson Institute Working Papers Series 38, William Davidson Institute at the University of Michigan.
  9. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," NBER Working Papers 8852, National Bureau of Economic Research, Inc.
  10. Konstantin Sonin, 2003. "Why the Rich May Favor Poor Protection of Property Rights," Working Papers w0022, Center for Economic and Financial Research (CEFIR).
  11. Hoff, Karla & Stiglitz, Joseph E., 2002. "After the Big Bang? Obstacles to the emergence of the rule of law in post-communist societies," Policy Research Working Paper Series 2934, The World Bank.
  12. 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. Campos, Nauro F & Giovannoni, Francesco, 2006. "Lobbying, Corruption and Political Influence," CEPR Discussion Papers 5886, C.E.P.R. Discussion Papers.
  2. 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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