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Title: Restructuring as a Signal: A Simple Formalization

Author(s): Emilio Colombo

Publication Date: September 1999

Keyword(s): Restructuring, Signalling and Transitional Economy

Programme Area(s): Transition Economics

Abstract: Several studies stressed that contrary to initial expectations, state-owned firms at the beginning of transition undertook painful measures to adjust to the new economic environment. This Paper investigates this behaviour in a simple game, a theoretic framework. It is argued that the massive amount of lay-offs created by state-owned firms during the initial phase of 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.

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Bibliographic Reference

Colombo, E. 1999. 'Restructuring as a Signal: A Simple Formalization'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2227