Company performance and optimal capital structure: evidence of transition economy (Russia)
Purpose – The paper analyzes the effects of the capital structure on company performance (return on assets).
The analysis is conducted in a large sample of high-tech manufacturing and service companies in the transition
economy (Russian Federation). In addition to the aggregated analysis, separate investigations are conducted to
scrutinize the impact of company age, size and location factors (the effects of agglomerations). This research
postulates the existence and variability of the optimal capital structure and its dependence on economic crisis.
Design/methodology/approach – We utilized a large sample that includes 1,826 enterprises over the period
from 2013 to 2017. The estimation was performed using the panel-corrected standard error estimation
technique (Prais–Winsten regression) to account for the panel nature and distributional properties of our data.
The existence of the optimal capital structure was assessed based on a curvilinear (quadratic) function.
Findings – The results are consistent with the Static Trade-off Theory and show that this theory is applicable
to countries with transition economy. They demonstrate that effective management of the capital structure can
increase return on assets by 16–22%. The optimal share of borrowed capital is higher for small businesses
compared to larger ones and for enterprises located in agglomerations compared to those located in other
regions. A greater increase in profitability can be achieved by larger firm companies compared to smaller ones.
High share of borrowed capital leads to negative profitability, i.e. to losses by enterprises. No significant
differences in profitability growth were identified between young and mature enterprises. The optimal share of
borrowed capital that maximizes return on assets is in the range of 0–21%.
Current article is dedicated to the relationship between effectiveness of usage of intellectual capital and capital structure of firms in Russia in 2005-2007. Current research showed that effectiveness of usage of intellectual capital of firms has a positive influence over the level of financial leverage. The result of the research has showed that the more effective usage of intellectual capital makes a company more attractive for the credit organizations and opens more sources to obtain financing. There were also revealed some specific features of relationship between the effectiveness of utilization of intellectual capital and corporate financial decisions in Russia. The result is consistent with the results from the similar researches from the developed markets.
Universities are a powerful attractor of youth, including remain the main resource for preserving and attracting talent to the regions. In this study, we have analyzed two main peaks of youth migration - “school-university” and “university-labor market”. The relevance of the study is due to the development of regional systems of higher education, taking into account the positive forecast of the demographic growth of young people, as well as an increase in the rate of growth of educational migration. In addition, we have carried a qualitative analysis of the motives and factors of educational migration on the example of applicants from several regions of the Russian Federation.
This article sets out to describe the current situation in the social housing sector in Russia. The author presents the historical background of social housing in Russia, it’s development and current conditions in the context of the transition from planned housing sector to one governed by market relations. The article also contains the analysis of the key structural elements of the social housing sector and expert evaluation of how well the social housing works as a mechanism for improving the housing conditions of the poor and vulnerable groups of population. The important role in the article is given to the legal status of social housing tenants, rent-setting policies and the problems of social housing finance. The main development opportunities and the main challenges for housing policy are revealed in the final sections of the article.
The paper explores theoretical approaches to the company IPO underpricing and analyzes capital structure impact on the underpricing of the Russian issuers.
This study investigates the puzzle of zero-debt in emerging markets using a sample of firms from Eastern Europe during 2000-2013. The results of this paper are in line with the previous research of firms from developed markets. Firms that are financially constrained do not use debt as a result of credit rationing while financially unconstrained firms intentionally eschew debt to maintain financial flexibility and avoid underinvestment incentives. Furthermore, this study provides new insights into unconstrained firms’ performance during different economic situations. Firms that strategically avoid debt show better financial results than levered firms.
Despite a clear distinction in law between equity and debt, the results of such a categorization can be misleading. The growth of financial innovation in recent decades necessitates the allocation of control and cash-flow rights in a way that diverges from the classic understanding. Some of the financial instruments issued by companies, so-called hybrid instruments, fall into a grey area between debt and equity, forcing regulators to look beyond the legal form of an instrument to its practical substance. This innovative study, by emphasizing the agency relations and the property law claims embedded in the use of such unconventional instruments, analyses and discusses the governance regulation of hybrids in a way that is primarily functional, departing from more common approaches that focus on tax advantages and internal corporate control. The author assesses the role of hybrid instruments in the modern company, unveiling the costs and benefits of issuing these securities, recognizing and categorizing the different problem fields in which hybrids play an important role, and identifying legal and contracting solutions to governance and finance problems. The full-scale analysis compares the UK law dealing with hybrid instruments with the corresponding law of the most relevant US jurisdictions in relation to company law. The following issues, among many others, are raised:
– decisions under uncertainty when the risks of opportunism of the parties is very high;
− contract incompleteness and ex post conflicts;
− protection of convertible bondholders in mergers and acquisitions and in assets disposal;
− use of convertible bonds to reorganise and restructure a firm;
− timing of the conversion and the issuer’s call option;
− majority-minority conflict in venture capital financing;
− duty of loyalty;
− fiduciary duties to preference shareholders; and
− financial contract design for controlling the board’s power in exit events.
Throughout, the analysis includes discussion, comparison, and evaluation of statutory provisions, existing legal standards, and strategies for protection. It is unlikely that a more thorough or informative account exists of the complex regulatory problems created by hybrid financial instruments and of the different ways in which regulatory regimes have responded to the problems they raise. Because business parties in these jurisdictions have a lot of scope and a strong incentive to contract for their rights, this book will also be of uncommon practical value to corporate counsel and financial regulators as well as to interested academics.