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

  • Campos, Nauro F
  • Giovannoni, Francesco

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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Article provided by University of Chicago Press in its journal Journal of Law and Economics.

Volume (Year): 49 (2006)
Issue (Month): 2 (October)
Pages: 681-706

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Handle: RePEc:ucp:jlawec:y:2006:v:49:i:2:p:681-706
Contact details of provider: Web page: http://www.journals.uchicago.edu/JLE/

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  1. Roland, Gérard & Verdier, Thierry, 2000. "Law Enforcement and Transition," CEPR Discussion Papers 2501, C.E.P.R. Discussion Papers.
  2. Nauro F. Campos & Fabrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," William Davidson Institute Working Papers Series 470, William Davidson Institute at the University of Michigan.
  3. Olivier Blanchard & Michael Kremer, 1997. "Disorganization," William Davidson Institute Working Papers Series 38, William Davidson Institute at the University of Michigan.
  4. 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.
  5. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
  6. 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.
  7. Nada Mora & Ratna Sahay & Jeromin Zettelmeyer & Pietro Garibaldi, 2002. "What Moves Capital to Transition Economies?," IMF Working Papers 02/64, International Monetary Fund.
  8. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," American Economic Review, American Economic Association, vol. 92(5), pages 1335-1356, December.
  9. Gérard Roland, 2004. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 026268148x, June.
  10. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  11. J. Stiglitz, 1999. "Whither Reform? Ten Years of the Transition," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
  12. 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.
  13. 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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