Financing Patterns in Transition Economies: Privatized Former SOEs versus Ab Initio Private Firms
44 Pages Posted: 13 Mar 2016 Last revised: 29 Mar 2019
Date Written: March 26, 2019
We employ 19,521 unique firms in 30 transition economies to investigate the relation between the origins of private firms and their financing patterns. In our sample, the private firms are either privatized former state-owned enterprises (SOEs) or ab initio (from the beginning) private firms. Our results show that privatized former SOEs finance a higher proportion of their fixed assets from bank finance and supplier credit, while ab initio private firms rely more on informal finance. We argue that privatized former SOEs continue to benefit from the political and financial connections established during their SOE era. We further document that financial institution development affects the financing patterns of these two groups differently. In our sample countries, financial institution advancement benefits privatized SOEs more than it benefits ab initio private firms.
Keywords: Privatization; Financing pattern; Transition economy; Institution development; Business Environment and Enterprise Performance Survey (BEEPS)
JEL Classification: G10, G32, L33, O16
Suggested Citation: Suggested Citation