Corporate Raiding and the Role of the State in Russia
To what extend are Russian state agencies involved in predatory behaviour, and what are the determinants of their activities? Analysing a novel dataset containing 312 cases of illegal corporate raiding (reiderstvo) between 1999 and 2010, this paper identifies a shift both in the regional and sectoral distribution of raiding attacks over time, as well as an increasing participation of state agencies in criminal raiding attacks. Using panel regression analysis to look at the determinants of increasing state involvement, I find that election results for the ruling president and his party, as well as the degree to which elections are manipulated throughout Russia’s regions are significantly and positively correlated with the number of raiding attacks in a given region, while regions with governors that have stronger local ties are characterized by a smaller number of attacks. A potential interpretation of these findings is that the federal centre might tolerate a certain degree of predatory activities by regional elites, as long as these elites are able to deliver a sufficiently high level of electoral support for the centre, with the effect being weaker in regions where the governor is interested in the long-term development of the regional economy.
Why doesn’t Russia grow? While Russia’s economy still has a lot of potential, levels of investment and firm entry have been low and declining over the last couple of years. Even more so than international sanctions and declining oil prices, one of the main reasons for Russia’s adverse investment climate are adverse institutions. In this paper, we show that losing your firm through predatory raiding attacks by criminal groups or corrupt state agencies has remained a real risk throughout the last 15 years. Similarly, high levels of regulatory pressure by law enforcement agencies have remained a serious obstacle to entrepreneurs and investors. In the paper, we first describe the scope of the problem, and then analyze why despite repeated attempts the Kremlin has not been able to solve the issue.
This paper considers the problem of raiding attacks on property in Russia, which often involve unlawful criminal prosecution of employers and their subsequent imprisonment. This phenomenon is beyond the scope of what is called the "hostile takeover" in international practice, because it inherits a number of instruments of power pressure on business, which were widely spread in Russia in the 90s. In this study, we use the internal database of the Center for Public Procedures "Business against Corruption" containing more than 600 applications from Russian entrepreneurs about cases raiding attacks that occurred from 2011 to 2013. In our view, this indicator with some restrictions may reflect the magnitude of the problem. Consideration of the current data in the regional context allows us to answer the question about the causes of the high number of raiding attacks in some regions and its absence in other regions of Russia. We hope to define some «threshold conditions" that make the growth of raiding possible. With the use of such instruments as «decision trees» and «regression analysis», we conclude that raiding is common in regions with the developed commercial, construction and industrial sector and the lack of oil production. Favorable conditions for the spread of raiding attacks are the lack of transparency of judicial system, a large number of crimes in the sphere of business activity and the weak development of non-profit organizations in the region. In our opinion, these characteristics reflect the willingness and capacity of individual representatives of law enforcement agencies to participate in the raider attacks.
In the past 10 years Russia has undertaken several attempts at reforming its law enforcement and judicial system, which, unfortunately, had little effect. One of the reasons lies in a lack of “feedback mechanisms” and a shortage of reliable information on the processes going on inside law enforcement agencies. The heavy-handed system of reporting (so called “palochnaya sistema”) not only impedes the obtaining of complete data on possible problems within the law enforcement system, but often motivates law enforcement officers to tamper with data and breach laws. In this article, we will show that from the theoretical point of view the recent tendencies in the Russian law enforcement system can be described as dominance of the “logic of discipline,” using the terms of Michel Foucault. We will consider the tools for external evaluation of law enforcement bodies’ performance using the data of the survey of 3317 attorneys in 35 Russian regions and the information on entrepreneurs’ complaints against corporate raiding filed with the Center of Public Procedures “Business against Corruption.” We will show that such indicators help identify “trouble zones” — regions and agencies where the current situation is more unfavorable than elsewhere. Therefore, external comparative evaluations of the quality of the law enforcement system could significantly enhance the information on existing problems in law enforcement available to the authorities and the public. In addition, by creating such a highly demanded public analytical product the lawyer corporation and business associations could achieve greater recognition from society and powers-that-be.
The paper examines the structure, governance, and balance sheets of state-controlled banks in Russia, which accounted for over 55 percent of the total assets in the country's banking system in early 2012. The author offers a credible estimate of the size of the country's state banking sector by including banks that are indirectly owned by public organizations. Contrary to some predictions based on the theoretical literature on economic transition, he explains the relatively high profitability and efficiency of Russian state-controlled banks by pointing to their competitive position in such functions as acquisition and disposal of assets on behalf of the government. Also suggested in the paper is a different way of looking at market concentration in Russia (by consolidating the market shares of core state-controlled banks), which produces a picture of a more concentrated market than officially reported. Lastly, one of the author's interesting conclusions is that China provides a better benchmark than the formerly centrally planned economies of Central and Eastern Europe by which to assess the viability of state ownership of banks in Russia and to evaluate the country's banking sector.
The paper examines the principles for the supervision of financial conglomerates proposed by BCBS in the consultative document published in December 2011. Moreover, the article proposes a number of suggestions worked out by the authors within the HSE research team.