Determinants of Financial Distress: What Drives Bankruptcy in A Transition Economy? The Czech Republic Case

59 Pages Posted: 1 May 2002

See all articles by Lubomir Lizal

Lubomir Lizal

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); Czech National Bank (CNB)

Date Written: January 2002

Abstract

The main factors influencing the probability of bankruptcy are analyzed on Czech Republic 1993-1999 firm data. Basic models of the bankruptcy are compared: neoclassical, financial and corporate governance. The corporate governance hypothesis does not receive support in the ownership but the indicator of voucher privatization supports it. The initial conditions from early 90?s were not the driving the financial distress. The voucher-scheme privatization results in poorer corporate governance. These firms are more likely to go bankrupt, ceteris paribus. On the other hand, former large SOEs are less likely to bankrupt than firms with a similar debt structure - this is an evidence of soft budget constraints.

Keywords: Czech Republic, bankruptcy, privatization, soft budget constraint, financial distress

JEL Classification: P34, P31, G33, G34, P21, K2

Suggested Citation

Lizal, Lubomir and Lizal, Lubomir, Determinants of Financial Distress: What Drives Bankruptcy in A Transition Economy? The Czech Republic Case (January 2002). Available at SSRN: https://ssrn.com/abstract=307224 or http://dx.doi.org/10.2139/ssrn.307224

Lubomir Lizal (Contact Author)

Czech National Bank (CNB) ( email )

Na Prikope 28
CZ-11503 Praha 1
Czech Republic

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

P.O. Box 882
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Prague 1, 111 21
Czech Republic
+420 2 2400 5114 (Phone)
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