The Dynamics of Financial Instability of Organizations During Institutional Reforms: the Case of Uzbekistan

The study considers the dynamics of financial instability of organizations in Uzbekistan before and after the large-scale institutional reforms of 2017, applying Hyman Minsky’s financial instability hypothesis. The novelty of this work lies in several aspects. For the first time, the level of financial instability of organizations in Uzbekistan was analyzed using Minsky’s hypothesis. Minsky’s hypothesis has not previously been applied to a country with a high level of state involvement in the economy. Furthermore, it is the first time that the impact of institutional reforms on the financial stability of organizations in Uzbekistan has been examined. The analysis was conducted based on data from 52 large organizations across various sectors of the economy, using three indices: the Nishi Index, the Beshenov and Rozmainsky Index, and the Mulligan Index. The study revealed that companies with state participation are more likely to become Ponzi firms, as they are less concerned about debt due to government support. Since 2014, the number of Ponzi firms has increased, reaching its peak in 2017 when large-scale institutional reforms began. This corresponds to the logic of prolonged economic expansion and state "backing." After the reforms began, the number of Ponzi firms decreased as companies became more cautious about taking on loans due to the reduction of state support. The most financially unstable sector was found to be the energy sector, where electricity and gas tariffs often did not cover real costs. This is due to government regulation of tariffs and subsidies, which limits investments in modernization. On the contrary, the construction and transportation sectors were the most stable. The construction industry has shown steady growth, while the transportation sector benefits from the country’s strategic location, providing stable income from international freight transport.