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Budget Constraints and Profitability: Evidence from a Transition Economy

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  • Marian Rizov

Abstract

A conceptual framework for analyzing the credit rationing and the link between credit access and profitability is developed. The empirical analysis using data from manufacturing firms in Bulgaria, provides direct estimates of credit rationing and its impact on profitability in transition economies. The results from the switching regression suggest that the presence of credit market constraints does impinge on profitability of credit rationed firms and support the credit crunch hypothesis for periods following the financial market collapse as a result of previous soft budget constraints.

Suggested Citation

  • Marian Rizov, 2002. "Budget Constraints and Profitability: Evidence from a Transition Economy," LICOS Discussion Papers 11602, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    • Handle: RePEc:lic:licosd:11602
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    File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp116.pdf
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    2. Rizov, Marian, 2004. "The price of EU accession: An insight into the Bulgarian real estate market," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 22(1), pages 72-83.

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    More about this item

    Keywords

    credit rationing; profitability; economies in transition; Bulgaria;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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