Working Paper: CEPR ID: DP2131
Authors: Simeon Djankov
Abstract: We provide comprehensive analysis of the isolation program for financially distressed firms in Romania. The results indicate that the isolation program did not deliver any tangible improvements in operational performance, nor did it enhance the process of privatization or liquidation of large loss-making enterprises. Firms included in the program faced softer budget constraints than their comparators outside the program, and few management changes in poorly performing firms took place. These findings question the feasibility of creating successful programs for enterprise restructuring under government auspices.
Keywords: isolation programme; financial distress; romania
JEL Codes: G33; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Isolation program (Y50) | Operational performance (L25) |
| Isolation program (Y50) | Profitability (L21) |
| Isolation program (Y50) | Privatization or liquidation processes (L33) |
| Isolation program (Y50) | Budget constraints (D10) |
| Isolation program (Y50) | Labor shedding (J63) |
| Selection into isolation program (C24) | Operational performance (L25) |
| Government support (H53) | Operational performance (L25) |