We provide the first test of and find support for the Hoff and Stiglitz (2004 a,b) model predicting under what conditions mass privatizations are accompanied by asset stripping. We also test and do not find support for the main prediction of the Campos and Giovannoni (2006) model. In addition to testing the theory, we tackle an important policy-oriented issue of why a large number of efficient firms disappeared during mass privatization in the booming economy of Montenegro. Econometrically, we present the first study to look at firms that disappeared during a mass privatization transition, improving upon prior studies that focused only on existing firms and ignored survival bias. Our analysis suggests that asset stripping and firm disappearance were present, and that asset stripping was a likely reason for the loss of efficient firms. We show that because more productive firms were liquidated, it is important to model survival bias in the selection of firms remaining in samples when estimating the effects of privatization or other ownership changes. We also show that one needs to distinguish between true start-ups and liquidated firms that re-appear as start-ups. In the absence of the rule of law, many firms that appear to have disappeared were in fact appropriated by managers and politically connected individuals.
This paper evaluates post-crisis effects of deleveraging policy in Slovenia. Increased collateralization, credit rationing, and a neglect of cash flow performance of banking clients drove reductions in banks’ credits to nonfinancial sectors. These jeopardized the normal deleveraging of companies with positive cash flows, and rolling over credits, which stifled economic growth. Erroneous sequencing, timing, and calibration of measures steering the deleveraging process generated these processes. Optimal deleveraging process demands that the Central Bank also focus on the stability of the financial system. This task should be a constitutional part of the third macro policy pillar, namely macroprudential policy.
We approached the issue of blockholding effectiveness and behaviour by studying some exemplary organizational transformations in the Republic of Srpska. We found two distinct clusters of blockholdings. The first cluster is workerentrenched blockholdings, where most workers are unionized. The second cluster constitutes worker-liberal blockholdings, where most workers are not unionized. There are two distinct subgroups in this cluster. The vast majority of blockholdings in the first subgroup developed a prevailing role of the capital owner, heavyweight management and a less trained workforce. The second subgroup nurtures reciprocity of management and core workers’ cognitive assets, and is also the most productive.