IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

The crisis as a wake-up call: do banks tighten screening and monitoring during a financial crisis?

  • Ralph de Haas


  • Neeltje van Horen

    (Dutch Central Bank.)

Recent developments and theoretical work on the transition economies has emphasised the importance of internal bargaining and incentives. This paper constitutes the first attempt to systematise the large and growing body of case studies of enterprise restructuring in Poland, Hungary, Slovakia, Russia and the Czech Republic. We begin from a framework in which the incentives and constraints on managers are crucial for the success of transforming enterprises into value maximising firms. The forms of, and the constraints on, active behaviour are examined for each enterprise across the dimensions of internal organisation, product and labour markets and investment. There is a huge variety in the quality of the evidence and in the experiences documented. Although we find widespread evidence of enterprise managers reacting to the post-reform environment, examples of deep restructuring are rare. Managers are hamstrung by weak incentives and increasing employee opposition, as well as by the uneven development of social and market infrastructure external to the enterprise. Low incentives arise from the absence of a managerial labour market, monopoly power and the large component of idiosyncratic knowledge possessed by incumbents. Opposition is based on the high costs of job loss. A characteristic feature of the transition economies is the ability of employees to veto restructuring and the opposition of labour appears likely to increase as unemployment rates and durations grow. Cases are described where the passage of restructuring measures has been facilitated by the willingness of the state to provide compensation to the ‘losers’. The examination of pre-privatisation behaviour suggests that the pace and depth of restructuring would increase after privatisation only when privatisation clearly transforms the incentives and constraints facing managers. The limited evidence on post- privatisation restructuring surveyed here suggests that foreign ownership of a former state-owned enterprise is the exception in which privatisation produces a marked change in behaviour. The role of product market power runs through the survey. Some enterprises use profits as a shield to avoid painful change, others have actively sought to build dominant positions. Aggregate data is presented which raises the possibility that the pattern of restructuring is being distorted by the uneven distribution of monopoly power across sectors. In our conclusions, we suggest ways in which future enterprise-level research could be improved to shed more light on the pattern of restructuring and to facilitate safer policy advice. From a policy perspective, we stress the complementarity between different reforms. The focus on the incentives and constraints facing enterprise managers highlights the limitations to a strategy which relies on privatisation to raise efficiency. The state must play a role in facilitating labour shedding and internal reorganisation of enterprises through providing finance for compensation, promoting the provision of social services outside the structure of enterprises and fostering the creation of new jobs. The hardening ahs promoted adjustment but over-tight budgetary policies may offset this, slowing the arte of new job creation ad heightening uncertainty about the prospects of enterprises under restructuring.

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:
Download Restriction: no

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 117.

in new window

Length: 31 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:ebd:wpaper:117
Contact details of provider: Postal: One Exchange Square, London EC2A 2JN
Web page:

More information through EDIRC

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. Dell’Ariccia, G. & Igan, D. & Laeven, L., 2009. "Credit Booms and Lending Standards : Evidence from the Subprime Mortgage Market," Discussion Paper 2009-46 S, Tilburg University, Center for Economic Research.
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:ebd:wpaper:117. 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: (Olga Lucas)

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.