Do personal connections matter for the performance of commercial banks in the period of economic development and financial stress? In the 1890s, the Russian Empire, when undergoing rapid state-led industrialization, grew through foreign capital inflows into the national debt and through the state’s procurement of industrial output. In 1899, the inflow of foreign capital fell sharply, initiating a financial crisis and a recession in heavy industry. In response to the crisis, authorities introduced a law which removed bankers from the boards of companies. Using newly collected historical data, this paper finds that the banks which experienced greater distress during the crisis had more personal connections to heavy industrial companies, those that had been most stimulated by state policies to expand production in the 1890s. These banks also had more personal ties to top government officials, those who were closest to the epicenter of policymaking. In contrast, during the industrial development of the 1890s, banks’ personal connections to heavy industrial companies and top officials were positively related to bank performance. These findings suggest that well-connected bankers might fail to provide the valuable expertise and foresight that is expected from them in a time of crisis when decisive action is required to adapt to a rapidly changing economic environment.
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 article analyzes the relationship between aggregate economic sentiment and GDP growth in Russia in the context of the regular large-scale surveys of business and households for the period of 1998–2020. The aim of the study is to prove the empirical value of the opinions of economic agents in expanding macroeconomic information, especially in a time of sudden crisis events, as well as the feasibility of their use in short-term statistics of business cycles. The cyclical sensitivity of aggregate economic sentiment relative to the reference GDP growth dynamics is tested. The authors calculate a composite economic sentiment indicator (ESI) that combines quarterly information on 18 survey-based indicators. The sample used to construct the ESI covers about 24,000 organizations in main economic activities and 5,100 consumers in all Russian regions. Common empirical patterns and cyclical movement are identified using the iterative procedure of visual and statistical analysis of the relationship between the GDP physical volume index and ESI. The results of cross-correlation analysis, Hodrick—Prescott filtering, and dating of cyclical dynamics are described. The significance of the composite survey-based indicator in the sectoral and cross-country analysis of entrepreneurial behavior, including that during the COVID-19-related crisis, is confirmed. The results of the study allow one to record the “cognitive shift” in the level of aggregated entrepreneurial confidence having formed in recent years. After the decline in ESI values during the protracted recession in 2015–2016, its subsequent four-year dynamics are characterized by the lowest potential compared with the recovery periods after all previous crises.
In this paper the interest rate channel of monetary policy transmission mechanism in the Russian economy is examined using error correction models. Results suggest that there is a pronounced, statistically significant, and increasing as time passes impact of Bank of Russia interest rates on lending and deposit rates of the Russian banks. This impact is heterogeneous and differently reveals itself in different segments of banks operation market. The response of commercial banks’ interest rates to the changes in Bank of Russia rates is characterized by a prominent asymmetry: interest rates on active bank operations quicker respond to an increase in monetary policy rates, while interest rates on passive bank operations — to a decrease of monetary policy rates. Heterogeneity and asymmetry of the response of commercial banks’ interest rates to monetary policy in Russia in general corresponds with results of the analysis of monetary transmission mechanism in some leading emerging and advanced countries. As far as the authors know, this article is the first article where the asymmetry of the interest rate channel in Russia is studied. Our results may become one of the starting points for the further analysis of interest rate channel in the Russian economy. What is more, they can be useful for the Bank of Russia since they explain the functioning of an interest rate channel in greater details. As a result, this new information will help the Bank of Russia to conduct a more effective inflation targeting policy.
Abstract The paper reveals the influence of vertical integration on the performance of companies in emerging markets, calculated as Lerner index. The model was developed to estimate the impact of vertically integrated companies, as well as in case of disintegration. The empirical correlation of profitability of companies from BRIC and the factors defining it in case of vertical integration was investigated, which was tested on the data for 2004-2012. Key significant factors in a cut of branches and the countries from BRIC are defined. The study will help to understand whether there is a trend towards diminishing dependency of the efficiency of companies’ performance from the high rate of vertical integration in the emerging capital markets and whether the economy of developing countries is ready to create competitive market conditions with a lot of independent companies in the industries where currently prevails oligopoly. The results of this work will allow companies’ management choose the optimal way of development in the context of possible vertical integration or disintegration transactions in a particular industry. Current research was motivated by trend towards disintegration with the creation of several competitive niche companies instead of one large in developed capital markets. At the same time, the evidences of effectiveness of both independent companies and vertically integrated giants in the industry are stated. To find out which strategy is more effective, this paper analyzes the influence of the vertical integration degree on the efficiency of companies’ performance.
Article is devoted to the research of the influence the informal employment has on the pension system sustainability in Russia. The impact of the informal employment reduction on the basic pension system parameters is estimated. The socio-demographic characteristics of the informal workers are analyzed. Recommendations for the informal employment reduction are given in order to improve the pension system sustainability
In this paper, we estimate the relationship between alcohol consumption and average life expectancy at birth as well as mortality from external causes in Russian regions. Statistics was collected from the Federal State Statistics Service of Russia for the period from 2008 to 2013. Alcohol sales in liters per capita serve as a proxy measure for alcohol consumption in a particular region. We convert different types of consumed alcoholic beverages to grams of absolute alcohol according to the percentage content of alcohol in a corresponding drink. The method of instrumental variables is applied for panel models with fixed effects. We investigate the relationship between life expectancy at birth for men and women as well as mortality from external causes and macroeconomic factors including average per capita income, unemployment rate, Gini coefficient and volume of alcohol consumption. Estimation results show strong positive relationship between alcohol consumption and mortality from external causes. The relationship between alcohol consumption and life expectancy is negative. These conclusions hold for both men and women. The increase in the total volume of alcohol consumption has a negative impact on public health, and to the greatest extent it relates to the male population. This leads to the formation of significant gender gap in life expectancy at birth in Russian regions. Findings are useful for the government policy aimed to prevent the population from alcohol abuse and to increase average life expectancy at birth.
This paper presents results of an empirical study which explores Russian banks’ ratings by the econometric modeling method. The nexus was examined between ratings assigned by Moody’s, S&P and Fitch agencies in 2010-2013 years and banks’ financial indicators. Several hypotheses concerning the most promising ways to influence bank rating are tested. According to the research, (1) the most significant factors that reveal the tendency in assigning the rating by each agency during the whole tested period are total assets, liquidity and profitability. Besides, for different agencies’ ratings in some years significant factors are a sufficiency of the capital, activity of crediting of economy, quality of a credit portfolio; (2) The significance of the banks’ capital sufficiency, asset management policy (including liquidity) and profitability varies during the whole period. The impact of these indicators on ratings is higher during the periods following and (especially) previous to financial crises than in time of relative financial stability between crises when they have smaller impact on a rating; (3) financial policy pursued by the bank management can lead to the changes in its rating, at least for some agencies. However the same methods directed on the improvement of financial indicators will lead to the different results for different ratings’ changes. The specific efforts of management will appear more productive for increase of a rating of one agency, others will be less inclined to react to changes of financial performance of banks. The adequacy of obtained results is shown by means of juxtaposing with findings of other domestic and foreign authors.
This article presents the findings of the first field experiment – a resume correspondence study – on age discrimination in the Russian labour market. Correspondence studies are nowadays viewed as the most objective way to test for hiring discrimination. This method consists of sending pairs of curricula for job offers, very similar in everything except the trait to be analyzed (age in our case). Data collection for the presented study was conducted in February-March 2018. Pairs of matched applications, one from a fictitious 29-year-old female applicant and one from a fictitious 48-year-old female applicant, were sent to 341 employers with job openings for accountants in Moscow posted on the one of the most popular job search websites. It turned out that the probability of receiving an invitation for an interview for an older candidate is 24-32%, whereas for a younger candidate 45-52%. Thus, the positive callback ratio is 1.8-2.5. The indicator of “net discrimination” calculated as the difference in the shares of positive callbacks from the number of vacancies for which at least one response is received, for the younger and older candidates is 37-49%. Comparing with the results of the existing studies, it turns out that the obtained discrimination level is quite high. Taking into account the population aging, a reduction in the workforce and the inevitable prospect of an increase in the retirement age, measures must be taken to combat age discrimination and allow older people to work on an equal basis with young people.