DP898 On the Role of Banks in Enterprise Restructuring: The Polish Example

Author(s): Sweder van Wijnbergen
Publication Date: February 1994
Keyword(s): Commercial Bank Reform, Corporate Governance, Eastern Europe, Financial Sector Regulation
JEL(s): D21, G21, G28, G3
Programme Areas: Applied Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=898

Governments throughout Eastern Europe have been singularly unsuccessful in dealing with large loss-making SOEs. A more promising approach would create an incentive framework and legal environment where the SOE's major non-government creditor can take the lead in initiating restructuring and the design of a new, viable capital structure. Such a lead bank is much more likely to gain access to the inside knowledge that gives the firm its surplus value as a going concern. The details of such an environment are laid out using the recent Polish attempt to launch a wholesale cleanup of the loss-making SOEs along lines promoted in this paper.