The Failure of Government-led Program of Corporate Reorganization in Romania
We provide the first comprehensive cost-benefit analysis of government-led reorganization programs for financially distressed firms in transition economies. The study is based on empirical evidence on the programs in Albania, Arinenia, Bulgaria, FYR Macedonia, Romania, Kazakhstan, Kyrgyz Republic, and Uzbekistan, with a particular focus on the Romanian program which is the only completed program to date. Our results indicate that the reorganization program failed to deliver any tangible improvements in the operational performance of firms. We also show that firms included in the program were faced with softer budget constraints than their comparators outside the program. Finally, we show that the cost of the program equaled three years of salaries for all workers in reorganized firms. The use of this money as severance pay for workers may have eliminated the pressure for government support and made it easier to liquidate or privatize firms. These findings question the feasibility for creating workable reorganization programs under government auspices.
|Date of creation:||01 Sep 1997|
|Contact details of provider:|| Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109|
Phone: 734 763-5020
Fax: 734 763-5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:wdi:papers:1997-139. 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: (WDI)
If references are entirely missing, you can add them using this form.