Financial and Enterprise Restructuring in Emerging Market Economies

IMF Working Papers, March 1, 1994

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Financial and Enterprise Restructuring in Emerging Market Economies

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Bibliographic details

• Authors: Steven M. Fries, Timothy D. Lane
• Published: March 1, 1994
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451978858.001

Key findings

• The foremost task in building sound financial structures in emerging market economies is to resolve the bad loan problem and to recapitalize insolvent state banks.
• Restoring an incentive for banks to price accurately the risks of new lending would be an important first step in strengthening financial control.
• Addressing bad loans and bank recapitalization alone is not sufficient; the remainder of the task is to provide financing that facilitates the economic restructuring of SOEs.
• A comprehensive strategy may involve combining discipline derived from enforcing existing loans to SOEs with adequate funding for new forms of ownership.
• Financing needs identified include support for enterprise sell-offs and leasing as mechanisms to restructure enterprises and transfer ownership or operational control.

Policy recommendations and approaches

• Resolve nonperforming loans and recapitalize insolvent state banks to restore correct risk pricing in lending.
• Enforce existing loans to SOEs to derive discipline and signal consequences for nonpayment or poor performance.
• Provide adequate funding mechanisms tailored to enterprise restructuring, including:
  • Financing for enterprise sell-offs.
  • Financing for leasing arrangements.
• Combine enforcement of existing claims with proactive financing instruments to enable ownership change and operational restructuring of loss-making enterprises.

Subjects and keywords emphasized

• Bank credit; Banking; Distressed assets; Emerging and frontier financial markets; Financial institutions; Financial markets; Financial sector policy and analysis; Financial statements; Loans; Moral hazard; Public financial management (PFM)
• Central and Eastern Europe; Distressed assets; emerging market economy; enterprise asset; enterprise operation; enterprise restructuring; enterprise sector; enterprise sell-off; Financial statements; Loans; loss-making enterprise; Moral hazard; owner-managed firm; WP

Key publication facts and identifiers (as presented in source)

• BySteven M. Fries, Timothy D. Lane
• March 1, 1994
• Pages: 28
• Volume: 1994
• Issue: 034
• Series: Working Paper No. 1994/034
• DOI: https://doi.org/10.5089/9781451978858.001
• Stock No: WPIEA0341994
• ISBN: 9781451978858
• ISSN: 1018-5941

Financial and Enterprise Restructuring in Emerging Market Economies — BySteven M. Fries, Timothy D. Lane; March 1, 1994; Working Paper No. 1994/034; DOI: https://doi.org/10.5089/9781451978858.001