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Property Rights, Finance, and Entrepreneurship

  • Simon Johnson
  • John McMillan
  • Christopher Woodruff

Is investment constrained more by insecure property rights or by limited external finance? For five transition economies in Eastern Europe and the former Soviet Union we find that weak property rights limit the reinvestment of profits in startup ma nufacturing firms. Access to credit does not appear to explain differences in investment. At least in the early stages of post-communist reform, retained earnings appear to have been enough to finance the investments that managers wanted to make.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-1999/WP212.PDF
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 212.

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Date of creation: 1999
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Handle: RePEc:ces:ceswps:_212
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  1. Holmstrom, Bengt, 1996. "Financing of Investment in Eastern Europe: A Theoretical Perspective," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 205-37.
  2. Shyam-Sunder, Lakshmi & C. Myers, Stewart, 1999. "Testing static tradeoff against pecking order models of capital structure," Journal of Financial Economics, Elsevier, vol. 51(2), pages 219-244, February.
  3. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
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  5. Andrzej Bratkowski & Irena Grosfeld & Jacek Rostowski, 2000. "Investment and Finance in "de novo" private firms: Empirical Results from the Czech Republic, Hungary and Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 101-116, March.
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  7. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  8. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  9. Simon Johnson & Daniel Kaufmann & John McMillan & Christopher Woodruff, 2003. "Why Do Firms Hide? Bribes and Unofficial Activity after Communism," Public Economics 0308004, EconWPA.
  10. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  11. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
  12. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-37, October.
  13. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  14. Anna Meyendorff, 1998. "Tax Avoidance and the Allocation of Credit," William Davidson Institute Working Papers Series 150, William Davidson Institute at the University of Michigan.
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  16. Anna Meyendorff & Anjan V. Thakor, 1997. "Romanian Financial System Reform," William Davidson Institute Working Papers Series 100, William Davidson Institute at the University of Michigan.
  17. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  18. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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