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Financial Restructuring in Banking and Corporate Sector Crises: What Policies to Pursue?

  • Stijn Claessens
  • Daniela Klingebiel
  • Luc Laeven

We review the literature on resolving bank and corporate sector crises to identify government policies that affect the depth of a crisis and the ease and sustainability of recovery, and to analyze their fiscal cost. A consistent framework - including sufficient resources for loss-absorption and private agents facing the right framework of sticks and carrots - is the, although often missing key to successful bank and corporate restructuring. Sustainability of restructuring calls for deeper structural reforms, which often requires dealing with political economy factors up-front. Using data for 687 corporations from eight crisis countries, we find empirically that a package of specific resolution measures can help accelerate the recovery from a crisis. These policies, however, come with significant fiscal costs.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8386.

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Date of creation: Jul 2001
Date of revision:
Handle: RePEc:nbr:nberwo:8386
Note: IFM
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  1. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
  2. Mark R. Stone, 2000. "Large-Scale Post-Crisis Corporate Sector Restructuring," IMF Policy Discussion Papers 00/7, International Monetary Fund.
  3. Timothy D. Lane & Marianne Schulze-Gattas & T. M. Tsikata & Steven Phillips & Atish R. Ghosh & A. Javier Hamann, 1999. "IMF-Supported Programs in Indonesia, Korea and Thailand," IMF Occasional Papers 178, International Monetary Fund.
  4. Dollar, David & Hallward-Driemeier, Mary, 2000. "Crisis, Adjustment, and Reform in Thailand's Industrial Firms," World Bank Research Observer, World Bank Group, vol. 15(1), pages 1-22, February.
  5. Claessens, Stijn & Djankov, Simeon & Xu, Lixin Colin, 2000. "Corporate Performance in the East Asian Financial Crisis," World Bank Research Observer, World Bank Group, vol. 15(1), pages 23-46, February.
  6. Mark R. Stone, 2000. "The Corporate Sector Dynamics of Systemic Financial Crises," IMF Working Papers 00/114, International Monetary Fund.
  7. Patrick Honohan & Daniela Klingebiel, 2000. "Controlling fiscal costs of banking crises," Proceedings 682, Federal Reserve Bank of Chicago.
  8. Honohan, Patrick & Klingebiel, Daniela, 2000. "Controlling the fiscal costs of banking crises," Policy Research Working Paper Series 2441, The World Bank.
  9. Ofek, Eli, 1993. "Capital structure and firm response to poor performance: An empirical analysis," Journal of Financial Economics, Elsevier, vol. 34(1), pages 3-30, August.
  10. Leslie Teo & Charles Enoch & Carl-Johan Lindgren & Tomás J. T. Baliño & Anne Marie Gulde & Marc Quintyn, 2000. "Financial Sector Crisis and Restructuring: Lessons from Asia: Lessons from Asia," IMF Occasional Papers 188, International Monetary Fund.
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