Examines the steps involved in restructuring the corporate sector. Large-scale corporate restructuring made necessary by a financial crisis is one of the most daunting challenges faced by economic policymakers. The government is forced to take a leading role, even if indirectly, because of the need to prioritize policy goals, address market failures, reform the legal and tax systems, and deal with the resistance of powerful interest groups.

©2002 International Monetary Fund

Series Editor

Jeremy Clift

IMF External Relations Department

Cover design and composition Massoud Etemadi, Choon Lee, and the IMF Graphics Section

ISBN 9781589060951

ISSN 1020-5098

Published June 2002

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The Economic Issues series aims to make accessible to a broad readership of nonspecialists some of the economic research being produced on topical issues by IMF staff. The series draws mainly from IMF Working Papers, which are technical papers produced by IMF staff members and visiting scholars, as well as from policy-related research papers.

This Economic Issue is based on IMF Policy Discussion Paper PDP/00/7 Large-Scale Post-Crisis Corporate Restructuring, July 2000, on IMF Working Paper WP/00/114 The Corporate Sector Dynamics of Systemic Financial Crises, June 2000, and on IMF Paper on Policy Analysis and Assessment PPAA/98/13 Corporate Debt Restructuring in East Asia: Some Lessons from International Experience, October 1998. Additional material on Japan has been added for this pamphlet. Jeremy Clift of the External Relations Department prepared the text for this pamphlet. Citations for the studies reviewed are provided in the original paper, which readers can purchase from the IMF Publication Services ($10.00), or download from www.imf.org.

The views expressed in this publication are those of the author(s) and do not necessarily represent those of the IMF or IMF Policy.

Background to the Pamphlet

This pamphlet is based mainly on evidence collected from nine systemic financial crises where the corporate sector played a key role (Table 1). Real gross domestic product or GDP over the course of these episodes contracted by an average of 6 percent. This set of episodes is not comprehensive. Small countries and some cases with less successful restructuring efforts (Romania and Russia in the early 1990s) are not included. Rather, the nine episodes are each important ones, and data and documentation on them are more readily available. A box on Japan has been added.

Table 1.

Large-Scale Post-Crisis Corporate Restructuring Episodes

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Source: Author.

Crisis trough refers to the month when the level of seasonally adjusted industrial production during the crisis episode was at its lowest.

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The Role of Government in Times of Crisis