Poor results from the isolation program for financially distressed firms in Romania suggest that enterprise restructuring under government auspices does not work - that transition economies should privatize rapidly, without attempting first to restructure enterprises. How should countries in...

I provide the first comprehensive analysis of isolation programs for financially distressed firms in transition economies. The study is based on empirical evidence from the Romanian program. The results indicate that the isolation program did not deliver any tangible improvements in operational...

We identify the presence of soft budgets and analyse their impact on enterprise restructuring in Romania over the initial transition period. A simple analytical framework is developed to show that hardened budget constraints foster rationalization of costs, but not active restructuring. The...