IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Limits of Discipline: Ownership and Hard Budget Constraints in the Transition Economies

  • Frydman, R.
  • Gray, C.
  • Hessel, M.
  • Rapaczynski, A.
Registered author(s):

    This paper argues that the imposition of financial discipline is not sufficient to remedy ownership and governance-related deficiencies of corporate performance. Using evidence from the postcommunist transition economies, the paper shows that a policy of hard budget constraints falters when state firms, because of inferior revenue performance and lesser willingness to meet payment obligations, continue to pose higher credit risk than privatized firms. The brunt of state firms' lower creditworthiness falls on state creditors. But the "softness" of these creditors is unavoidable if it prevents a demise of firms that are in principle capable of successful restructuring through ownership changes.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://econ.as.nyu.edu/docs/IO/9188/RR00-02.PDF
    Download Restriction: no

    Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 00-02.

    as
    in new window

    Length: 38 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:cvs:starer:00-02
    Contact details of provider: Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
    Phone: (212) 998-8936
    Fax: (212) 995-3932
    Web page: http://econ.as.nyu.edu/object/econ.cvstarr.html
    Email:


    More information through EDIRC

    Order Information: Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
    Email:


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Djankov, Simeon, 1999. "The Enterprise Isolation Programme in Romania," CEPR Discussion Papers 2131, C.E.P.R. Discussion Papers.
    2. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    3. Mathias Dewatripont & Eric Maskin, 1995. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9603, ULB -- Universite Libre de Bruxelles.
    4. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1153-1191, November.
    5. Gomulka, S, 1985. " Kornai's Soft Budget Constraint and the Shortage Phenemenon: A Criticism and Restatement," Economic Change and Restructuring, Springer, vol. 19(1), pages 1-11.
    6. Perotti, E. C., 1998. "Inertial credit and opportunistic arrears in transition," European Economic Review, Elsevier, vol. 42(9), pages 1703-1725, November.
    7. Bai, Chong-en & Wang, Yijiang, 1998. "Bureaucratic Control and the Soft Budget Constraint," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 41-61, March.
    8. Berglof, Erik & Roland, Gerard, 1998. "Soft Budget Constraints and Banking in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 18-40, March.
    9. Janet Mitchell, 1999. "Theories of Soft Budget Constraints and the Analysis of Banking Crises," William Davidson Institute Working Papers Series 233, William Davidson Institute at the University of Michigan.
    10. Kornai, Janos, 1993. "The Evolution of Financial Discipline under the Postsocialist System," Kyklos, Wiley Blackwell, vol. 46(3), pages 315-36.
    11. Schaffer, Mark E., 1998. "Do Firms in Transition Economies Have Soft Budget Constraints? A Reconsideration of Concepts and Evidence," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 80-103, March.
    12. Fabrizio Coricelli & Alfredo Thorne, 1993. "Dealing with enterprises' bad loans," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(1), pages 112-115, 01.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:cvs:starer:00-02. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Stubing)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.