Restructuring in the Czech Republic: Beyond Ownership and Bankruptcy

CERGE-EI Working Paper Series No. 66

38 Pages Posted: 20 Feb 2010

See all articles by Aydin Hayri

Aydin Hayri

University of Warwick - Department of Economics

Gerald A. McDermott

University of South Carolina - Moore School

Date Written: May 1, 1995

Abstract

Restructuring of large industrial holdings in the Czech Republic (S-firms) depends on probes into new markets. The development and financing of probes generates internal holdups and stalemates among the government, banks and S-firms. The government tries to preserve the value of just-privatized S-firms while avoiding subsidies; banks, facing their delinquency, cannot force bankruptcy since keeping them as clients is as important as maintaining capital adequacy. A compromise arises, IMBR (intricate monitoring based restructuring), where the outside parties condition their involvement on a peculiar reorganization of the firm. We provide the empirical and theoretical underpinnings of IMBR, the emergence of which is neither deliberate nor accidental.

Keywords: Restructuring, Privatization, Incomplete Contracts, Monitoring

Suggested Citation

Hayri, Aydin and McDermott, Gerald A., Restructuring in the Czech Republic: Beyond Ownership and Bankruptcy (May 1, 1995). CERGE-EI Working Paper Series No. 66, Available at SSRN: https://ssrn.com/abstract=1556253 or http://dx.doi.org/10.2139/ssrn.1556253

Aydin Hayri (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Gerald A. McDermott

University of South Carolina - Moore School ( email )

1404 Greene St
Columbia, SC 29208
United States
803-777-1035 (Phone)

HOME PAGE: http://www.geraldamcdermott.com

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