The enterprise isolation program in Romania

We provide comprehensive analysis of the isolation program for financially distressed firms in Romania. The results indicate that the isolation progra m did not deliver any tangible improvements in operational performance, nor did it enhance the process of privatization or liquidation of large loss-m aking enterprises. Firms included in the program faced softer budget constr aints than their comparators outside the program, and few management change s in poorly performing firms took place. These findings question the feasib ility of creating successful programs for enterprise restructuring under go vernment auspices. (C) 1999 Academic Press.