| Summary: | The aim of this thesis is to identify the financial structures of enterprises in Bulgaria, and to identify whether these are key to explaining the relatively slow pace of transition. In this thesis, the Bulgarian economy is analysed using a Transaction Cost Framework (Coase's model built upon by Williamson). It is insufficient to analyse the performance of enterprises without looking at their operating environment, and in order to take these factors into account, a review of the literature looking at the effects of institutions on various structures was undertaken. Included in this is an analysis of the areas where potential for Bulgaria to develop technology, management and distribution channels is impeded. The unusual enterprise structures identified in the research appear to reflect the costs of transacting on the market which are increased by inactive financial intermediation. These costs are analysed and suggestions are made as to the potential means for transacting in a different way so as to avoid the transaction costs. The thesis concludes that the structure of the enterprises is not surprising given the level of market failure in Bulgaria. Analysing the traditional transaction costs provided a structured and useful way of looking at the problem of transition, and it is concluded that the many of the market failures such as small numbers of available counterparties that lift transaction costs are derived from the primary problem of liquidity constraints. These liquidity constraints dictate the methods in which firms have to conduct their activities as they remove other options for managing the supply chain. Means of relieving the liquidity constraint using measures such as maintaining the title to the goods at the beginning of the value added chain, paying only the value added to the intermediate manufacturers are proposed.
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