The main goal of this paper is to help determine why the communist (and partly even transition) economies are substantially inefficient in comparison with their market counterparts. The reasons will be analyzed with the help of the profit maximization model (based on the efficiency wage theory)...

We provide evidence that large creditors exert a governing influence over corporate borrowers outside of covenant (technical) violation and payment default states. We show that, subsequent to syndicated loan origination, borrowers decrease capital inefficiencies, increase investments in...

Internal capital markets of diversified firms have been associated with inefficient allocation of investment funds across divisions, leading to value losses. Utilizing a sample of diversified firms that adopted or eliminated Economic Profit Plans (EPPs) between 1990 and 2009, we show that...