We investigate to what extent firm investment in transition countries is sensitive to internal finance. We find that firms in Bulgaria and Romania are less sensitive to internal financing constraints, in contrast to firms in Poland and the Czech Republic. A likely explanation is that Bulgaria and Romania experience a stronger persistence of soft budget constraints than the other two more advanced countries.
- Financial constraints
- Soft budget constraint
- Transition to a market economy
ASJC Scopus subject areas
- Economics and Econometrics