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Does a Switch of Budget Regimes Constrain Managerial Discretion?: Evidence for Italian Public Enterprises' Investment

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  • Elisabetta Bertero
  • Laura Rondi

Abstract

This study examines the effect of the hardening of the budget constraint on the investment behaviour of Italian state owned enterprises (SOEs). It carries out a natural experiment that exploits the 1987 shift of budget regimes due to the pressure of European Union economic policies on the Italian government. Drawing from the theory of capital market imperfections, we apply the empirical framework for the analysis of investment-cash flow sensitivity to a panel of state-owned manufacturing firms during the period 1977-93.

Suggested Citation

  • Elisabetta Bertero & Laura Rondi, 2002. "Does a Switch of Budget Regimes Constrain Managerial Discretion?: Evidence for Italian Public Enterprises' Investment," WIDER Working Paper Series DP2002-29, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:dp2002-29
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    References listed on IDEAS

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    Cited by:

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    2. Crespi, Francesco & Scellato, Giuseppe, 2007. "Ownership Structure, Financial Constraints and Investment Decisions: Evidence from a Panel of Italian Firms," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200705, University of Turin.
    3. Belloc, Filippo & Nicita, Antonio & Sepe, Simone M., 2014. "Disentangling liberalization and privatization policies: Is there a political trade-off?," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 1033-1051.

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