Financing Patterns in Transition Economies: Privatized Former SOEs versus Ab Initio Private Firms

44 Pages Posted: 13 Mar 2016 Last revised: 29 Mar 2019

See all articles by Yu Liu

Yu Liu

University of Texas at El Paso

Nilesh B. Sah

University of South Florida - Department of Finance

Barkat Ullah

Morgan State University

Zuobao Wei

University of Texas at El Paso

Date Written: March 26, 2019

Abstract

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

Liu, Yu and Sah, Nilesh B. and Ullah, Barkat and Wei, Zuobao, Financing Patterns in Transition Economies: Privatized Former SOEs versus Ab Initio Private Firms (March 26, 2019). Available at SSRN: https://ssrn.com/abstract=2746716 or http://dx.doi.org/10.2139/ssrn.2746716

Yu Liu

University of Texas at El Paso ( email )

El Paso, TX TX

Nilesh B. Sah

University of South Florida - Department of Finance ( email )

Tampa, FL 33620-5500
United States
(813)-974-2088 (Phone)

HOME PAGE: http://business.usf.edu/faculty/finance/phdstudents/index.asp

Barkat Ullah (Contact Author)

Morgan State University ( email )

Baltimore, MD 21251
United States

Zuobao Wei

University of Texas at El Paso ( email )

500 W. University Ave.
El Paso, TX 79968
United States
915-747-5381 (Phone)
915-747-6282 (Fax)

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