Political connections of Russian corporations: Blessing or curse?
This paper provides comprehensive empirical evidence on political connections of Russian corporations based on a sample of companies for the period 2011–2015 (divided into subsamples before and after the events in Ukraine). Based on a unique database, the study (1) evaluates how common political connections are for Russian corporate environment, and (2) investigates the impact of political connections on firm value through an event study. The research shows that 27% of Russian corporations from the sample had the top officials of Russia as directors, and 43% of corporations were found to be politically connected on the basis of either state ownership or directorship. Political connections are unevenly distributed among industries, and regulated industries are more heavily politicized. Aviation, oil & gas, and banking were the most politically connected sectors of the Russian economy. The event study showed that political connections have a value-destructive total effect which is statistically significant and robust. Generally, the stock market responds to announcements of political connections with a drop in share prices by 1.34% on average within 5 trading days. Different groups of stakeholders exert different impacts on firm value. The most negative influence on firm value is that of politically connected owners. The stock market reacts to acquisitions of shares by politically connected owners with a drop in stock prices by 1.82% within 5 trading days, and with a drop in stock prices by 4.3% when the politically connected owners were individuals. The negative value effect of political connections strengthened after the events in Ukraine.
The paper is focused on the analysis of Russian stock market reaction on the announcements related to innovative activity of Russian traded companies. We use event study methodology to estimate abnormal stock returns in the announcement day. It is assumed that information about company’s progress in innovative activity is incorporated in stock prices. Therefore, if stock market investors positively perceive company's developments and its disclosure, it should be positive abnormal stock returns. The results show that Russian investors positively assess the announcements about completion of innovative project or its stage. Moreover, the reaction is independent of innovation type: development of a new product, production technology or organization practices. In addition, the reaction is stronger for larger companies that corresponds to increasing returns to scale assumption.
The connection between the sign correlation of Fechner and the classic Pearson correlation is studied. The sign correlation is linearly connected with the probability of the coincidence of the signs of random variables. One of the features of this measure is its simplicity. Therefore it can be used as an alternative measure of similarity between the returns of the market stocks. In the study there are numerical estimations connected with the application of the sign correlation and the detailed analysis of the proposed connection.
Market network analysis attracts a growing attention last decades. One of the most important problems related with it is the detection of dynamics in market network. In the present paper, the stock market network of stock’s returns is considered. Probability of sign coincidence of stock’s returns is used as the measure of similarity between stocks. Robust (distribution free) multiple testing statistical procedure for testing dynamics of network is proposed. The constructed procedure is applied for German, French, UK, and USA market. It is shown that in most cases where the dynamics is observed it is determined by a small number of hubs in the associated rejection graph.
Prior evidence suggests that board independence may enhance financial performance, but this relationship has been tested almost exclusively for Anglo-American countries. To explore the boundary conditions of this prominent governance mechanism, we examine the impact of the formal and information institutions of 18 national business systems on the board independence-financial performance relationship. Our results show that while the direct effect of independence is weak, national-level institutions significantly moderate the independence-performance relationship. Our findings suggest that the efficacy of board structures is likely to be contingent on the specific national context, but the type of legal system is insignificant.
One of the most important activities of enterprises today is responsible entrepreneurship. Corporate social responsibility (CSR) activities can help to forge a stronger bond between employees and corporations, can boost morale, and can help both employees and employers feel more connected with the world around them. Moreover, the growing importance of this concept results from the fact that it is perceived as an effective tool for increasing competitiveness, improving the image of the company, or contributing to the generation of higher profits. In today’s world, an active commitment to social responsibility is becoming more common for a company.
CSR and Socially Responsible Investing Strategies in Transitioning and Emerging Economies is an essential reference source that identifies the scale and scope of implementation of CSR and socially responsible investing strategies and standards in companies operating in different transitioning and emerging economies as well as assessing the global effects of these activities. Featuring research on topics such as economic growth, responsible investing, and business ethics, this book is ideally designed for managers, executives, directors, corporate professionals, government officials, industry leaders, academicians, students, and researchers in the fields of international economics, international business, marketing, finance management, and public relations.
In contrast to competition authorities in developed countries, Russian competition authority often applies price cap on domestic wholesale price for large exporting companies. Competition authority issues remedies under merger approval or as a part of infringement decisions. Until recently, remedies are considered almost exclusively as a sign of intention of Federal Antitrust Service, Russian Federation, to expand the influence on markets and to restore price regulation. In this context price remedies never have any positive effects.
We suggest an alternative explanation. Large exporters of raw materials that obtain monopoly power due to mergers or protectionist policies exercise third-degree price discrimination. Prices for domestic customers, that are higher than export prices, decrease social welfare within the country. Price remedy is one of the ways to prevent price discrimination, together with import liberalization and sanctions for excessive prices.
We analyze the impact of incremental market power due to mergers or protectionist trade policies as well as compensatory measures applied by Federal Antitrust Service, Russian Federation, on the markets of metals. As methods for empirical estimations financial event study and difference-in-differences method are applied. None of the instruments - including price remedies, antitrust investigations, the reduction of import tariffs - shows a clear advantage over others. With a reasonable degree of confidence we can only say that the lack of compensatory measures would be accompanied by higher prices in the domestic markets, up to several dozen percent.
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.