Restructuring as a signal: a simple formalization |
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Authors: | Emilio Colombo |
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Institution: | Department of Economics, Universitàdegli Studi di Milano-Bicocca, Italy |
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Abstract: | Several studies have stressed that, contrary to initial expectations, state-owned firms at the beginning of the transition undertook painful measures to adjust to the new economic environment. This paper investigates this behaviour in a simple game theoretic framework. It is argued that the massive amount of lay-offs created by state-owned firms during the initial phase of the transition can be interpreted as a signal directed to the banking sector in order to obtain more favourable financing conditions for the subsequent process of restructuring. The conclusions are strongly supported by Polish firm-level empirical evidence. JEL classification: P31, C72. |
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Keywords: | transitional economy restructuring signaling |
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