Definition: Bailout is a general term for extending financial support to a company or a country facing a potential bankruptcy threat. It can take the form of loans, cash, bonds, or stock purchases. A bailout may or may not require reimbursement and is often accompanied by greater government oversee and regulations.
The reason for bailout is to support an industry that may be affecting millions of people internationally and could be on the verge of bankruptcy due to prolonged financial crises.
Description: Bailout policies come in various forms, the most common being direct loans or guarantees of third-party [private] loans to the rescued entity. These direct loans are often on terms favouring the entity being rescued. Sometimes even direct subsidies are provided to the parties concerned. Stock purchases are also not uncommon.
The government or the financing body places strict requirements such as restructuring of organisation, no dividend payment to shareholders, change of management and in some cases a cap on salaries of executives till a stipulated time period or the repayment of dues. This may also be followed by a temporary relaxation of rules that may impact the accounts of the rescued entity.
Bailouts have several advantages. First, they ensure continued survival of the entity being rescued under difficult economic circumstances. Secondly, a complete collapse of the financial system can be avoided, when industries too big to fail start to crumble. The government in these cases steps in to avoid the insolvency of institutions that are needed for the smooth functioning of the overall markets.
Bailouts also have their disadvantages. Anticipated bailouts encourage a moral hazard by allowing not only promoters but also other stakeholders [customers, lenders, suppliers] to take higher-than-recommended risks in financial transactions. This happens because they start counting on a bailout when things go wrong.
While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to the appropriate style manual or other sources if you have any questions.
Select Citation Style
Copy CitationShare
Share
Share to social media
Facebook Twitter
URL
//www.britannica.com/topic/coup-detatGive Feedback
External Websites
Feedback
Corrections? Updates? Omissions? Let us know if you have suggestions to improve this article [requires login].
Feedback Type
Your Feedback Submit FeedbackThank you for your feedback
Our editors will review what you’ve submitted and determine whether to revise the article.
External Websites
Britannica Websites
Articles from Britannica Encyclopedias for elementary and high school students.
- coup d’état - Student Encyclopedia [Ages 11 and up]
Print Cite
verifiedCite
While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to the appropriate style manual or other sources if you have any questions.
Select Citation Style
Copy CitationShareShare
Share to social media
Facebook Twitter
URL
//www.britannica.com/topic/coup-detatFeedbackExternal Websites
Feedback
Corrections? Updates? Omissions? Let us know if you have suggestions to improve this article [requires login].
Feedback Type
Your Feedback Submit FeedbackThank you for your feedback
Our editors will review what you’ve submitted and determine whether to revise the article.
External Websites
Britannica Websites
Articles from Britannica Encyclopedias for elementary and high school students.
- coup d’état - Student Encyclopedia [Ages 11 and up]
Alternate titles: coup
By The Editors of Encyclopaedia Britannica
Table of ContentsKey People:Hugo Chávez Saigō Takamori Saddam Hussein Omar al-Bashir Blaise Compaoré...[Show more]Related Topics:civil war...[Show more]
See all related content →
coup d’état, also called coup, the sudden, violent overthrow of an existing government by a small group. The chief prerequisite for a coup is control of all or part of the armed forces, the police, and other military elements. Unlike a revolution, which is usually achieved by large numbers of people working for basic social, economic, and political change, a coup is a change in power from the top that merely results in the abrupt replacement of leading government personnel. A coup rarely alters a nation’s fundamental social and economic policies, nor does it significantly redistribute power among competing political groups. Among the earliest modern coups were those in which Napoleon overthrew the Directory on November 9, 1799 [18 Brumaire], and in which Louis Napoleon dissolved the assembly of France’s Second Republic in 1851. Coups were a regular occurrence in various Latin American nations in the 19th and 20th centuries and in Africa after the countries there gained independence in the 1960s.