Корпоративный долговой навес и инвестиции в российской экономике: роль финансовых условий и участия государства
After the global financial crisis Russian macroeconomic dynamics changed dramatically: reduced access to external financing and the worsening economic outlook led to very weak investment dynamics. We test and confirm the hypothesis that one of the reasons is high debt burden of Russian companies - debt overhang. We propose a new indicator for debt overhang. Now the issue of financing investment in Russia is especially important: due to political reasons, the international capital markets are closed for most Russian companies. Special attention is given to the active participation of the government in the capital of companies. Companies associated with the state have formal and informal preferences, easier access to debt financing and may have soft budget constraints.
This article discusses the objectives and challenges for corporate governance of SOEs in Russia, and provides an international perspective of the performance of SOEs as compared to privately owned companies. Recent trends in the policy and management of state property are described. The problems of corporate governance in Russia are described in an agency perspective, and survey evidence on corporate governance and transparency of Russian SOEs is provided. Particular attention is given to the legal construction of the state corporation. The final section on the performance effects of state ownership summarizes the key contributions in the international economic literature in this field.
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Sports economics is a relatively new field of research that is experiencing rapid growth in the economics literature. The importance of the sports industry to economies, coupled with the availability of financial and productivity data, have made the study of sports economics a useful avenue for exploring research questions that have eluded mainstream economics fields. The main goal of this Special Issue, “Topics in Sports Finance”, is to encourage theoretical and applied research in sports economics that is of interest to both academics and practitioners. This Special Issue is a collection representing the 10 research papers published in the International Journal of Financial Studies under the issue “Sports Finance 2018”.
The Special Issue “Topics in Sports Finance” begins with four articles that examine the financial health of European football in recent decades. The UEFA Financial Fair Play (FFP) regulations were developed in response to the deteriorating financial situation of football clubs in Europe. Many clubs have operated with annual operating losses and been in negative equity positions. The fear of long-established football clubs entering into receivership was becoming a looming reality. The FFP regulations were adopted for the 2011–12 European football league season. At the broadest level, the regulations require the submission of independently audited annual financial statements to UEFA, the banning of overdue payments on player transfers and owed taxes, a break-even requirement over the sum of three consecutive reporting years, and the disallowing of a negative equity position that worsens over two consecutive years. Failure to meet these regulations can result in penalties of warnings, fines, withholding of prize money and transfer bans, as well as additional penalties that can be imposed by the national associations. The goals of the FFP regulations were two-fold: 1) to promote financial stability of UEFA clubs and to improve the overall level of profitability by limiting expenses, and 2) to reduce the competitive gap between the financially large and small clubs.
Dimitropoulos and Koronios (DK) focus on the stability of reportable revenues (as defined in the FFP regulations) and whether the FFP regulations have improved revenue stability. Stability is defined as the ability to predict next season’s revenue from the current season’s revenue. Using a large sample of 109 European clubs, DK find favorable results that support the FFP objectives, more so for financially smaller clubs. This is an important result since increased financially stability can reduce borrowing costs for capital (lower risk premiums) and make the clubs more attractive to shareholders (if they are held by shareholders).
The focus on club revenues in response to the FFP regulations is continued by Frank. Using summary financial data garnered from UEFA reports, Frank notes that reportable club revenues have improved since 2011–12, and attributes this growth to more responsible financial decisions by club management, knowing that the FFP regulations prohibit moral hazard type behavior that relies on ex post “bailouts” by club sponsors or owners. Financial parity has become more elusive under the FFP regulations, and Frank attributes this to the greater ability of larger clubs to finance higher payrolls by generating higher revenues, while the smaller revenue-generating ability of smaller clubs limits their payroll growth. The FFP regulations do not directly address this issue, and Frank suggests some possible solutions. The FFP regulations could result in unexpected increases in the expenses of football clubs that are not associated with payrolls and player acquisitions.
Mareque, Barajas, and Lopez-Corrales (MBLC) examine the effects on auditing fees for clubs in the Spanish First Division. It could be the case that audit fees increased post-FFP due to the increased scrutiny the financial statements would receive from UEFA. MBLC found significantly higher audit fees using a regression model that uses a number of independent variables to explain audit fees. This could put clubs at a financial disadvantage post-FFP, however, MBLC note that the higher expected future revenues—that seem to be result from the FFP regulations—could more than offset the higher fees.
Despite the intentions of the FFP regulations to improve club profitability, Andreff notes that the majority of clubs in French League 1 still operate with annual losses, largely due to high payroll costs that have not translated into Champions League or Europa League prize monies. Clubs may have the ability to absorb these losses by securing lucrative sponsorship deals or by having owners who can subsidize losses through other business ventures. Andreff uses this logic to formalize a “soft budget constraint” that encourages profit-maximizing clubs to overspend on payrolls and player transfers.
The next four papers in this Special Issue focus on North American sports leagues and ask a great diversity of questions. Revenue sharing is an accepted business practice in the four major North American sports Leagues (NFL, MLB, NBA, and NHL). Contributing a share of club revenues into a central fund and then distributing the fund back to the clubs (equally in the NFL and MLB, and not equally in the NBA and NHL) is argued to support small-market clubs and improve parity.
Recent theoretical and empirical research suggests that parity worsens with revenue sharing. Rockerbie and Easton (RE) suggest an alternative, but complementary, argument for revenue sharing: that revenue sharing reduces the variance of revenues and provides a welfare gain to club owners by diversifying their revenues. After developing a measure of welfare gain, RE estimate significant welfare gains for MLB clubs over the last two decades. Ice hockey is a fast, physical game with frequent contact and minor confrontations.
The professional NHL and the semi-pro Canadian Hockey League (CHL) do not condone fighting but recognize that fighting is allowable by imposing lighter penalties than other sports leagues. Paul, Weinbach, and Riccardi (PWR) estimate the effect of fighting on game attendance in the CHL using a regression model that controls for other factors that could affect attendance. They also contribute to the mounting evidence that suggests that the uncertainty of outcome is not a factor in attendance demand, an important result for theoretical models that incorporate outcome uncertainty in demand functions.
Although not formally a sports league, the NCAA is certainly moving in that direction by adopting similar business practices (revenue sharing, a playoff system, and a centralized business model). American football is the most lucrative revenue source for NCAA schools that does not arise from tuition, donors, or governments. Baumer and Zimbalist (BZ) note that most of the athletic departments in a large sample of NCAA schools incur operating deficits, although determining what costs should be included in the calculation is not without controversy. BZ test the assertion that a successful athletic program confers other benefits that might justify running the program in a deficit, such as more applications, better quality students, and more donations and government funding. Their regression model is robust, and the results convincingly support the previous literature. The upshot is that without any significant benefits, college athletic departments are simply win-maximizers. European and Russian players comprised only 43 out of 210 players (20.5%) in the ten-round NHL draft in 1990. This figure increased to 79 out of 184 players (42.9%) in the seven-round 2018 NHL draft. European and Russian players are much more prevalent in the NHL than in the past, but they are still a minority in comparison to Canadian and American players. These foreign players might come at a higher price than in the past due to the increased competition for players from the Continental Hockey League (KHL) in Russia and the Swedish Hockey League (SHL). Fenn, Gerdes, and Rothstein (FGR) test this assertion by estimating a salary regression model that holds constant player performance variables and contract status. The results suggest that Russian and European players are paid a premium, perhaps suggesting that Canadian and American NHL players have fewer alternative employment possibilities.
The two papers that round out the Special Issue provide glimpses into rather underappreciated, yet growing, sports in the sports economics literature: English cricket and mixed martial arts (MMA) fighting. In recent years, cricket has become a lucrative sport with the advent of the Twenty20 format. This format limits the length of test matches to three hours or so, making for much better viewing for spectators, television, and internet audiences. Financial success has largely been limited to the Indian Premier League, Australia’s Big Bash, and international test matches.
Plumley, Wilson, Millar, and Shibli (PWMS) examine the extent to which this success has filtered through the English Cricket Board (ECB) to the UK County Championship. They ask the question of whether the clubs in the Championship can survive due to ongoing concerns regarding the absence of monies granted to them, by the ECB, from international matches. PWMS provide convincing evidence using data gleaned from club financial statements.
MMA has garnered large television and internet audiences since its organization in 2001 as the Ultimate Fighting Championship (UFC). Fighters have always received financial compensation for showing up for fights and winning fights, however, 2006 saw the introduction of bonus awards for the best knockout of the night, best submission, best overall match, and others. These bonus awards are a substantial portion of the possible earnings a fighter can take home for the night. Gift tests, statistically, whether the sizes of these bonus monies affect the performance of the contestants using an extensive dataset reaching back to 2001. Though economics suggests that the incentive effects could be strong, Gift finds no significant effect based on fight metrics.
This article analyzes the extent and sectoral distribution of state ownership in the Russian economy. The different legal forms of state-owned enterprises (SOEs) in Russia are described. Official data on the evolution of the size of the state sector is provided, where the size is measured by the number of SOEs, their share in employment, fixed assets, investment and industrial production. Shortcomings of the official ownership classification are highlighted. Next, the sectoral distribution of SOEs and the degree of their internationalization is described. Finally, data on the SOEs that are listed on the stock market is presented. It gives a picture of a much stronger involvement of the government in medium and large sized companies than what can be inferred from the official data. In a second part (to be published in the next issue of this journal) the governance problems and performance effects of state ownership are discussed.
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.
Being one item by definition investment is actually not homogenous: generally, there are two major types – capital investment and investment in M&A deals. They are different from firm’s point of view and influence economic growth through different channels. In this paper, we examine the relationship between new capital investments and investments in acquisitions in Russia using data for more than one hundred companies in 2004-2014. The period is split into two sub-samples – period of rapid growth (before the global financial crisis of 2008) and post-crisis one (after 2009). Our results show that relationship between fixed investments and investments in acquisitions is opposite for two periods. In the first period, relationship between two types of investment was positive for non-state companies and insignificant for state ones that possibly means that companies did not face the choice of investment form. After the global financial crisis, when monetary conditions and access to external capital markets for Russia tightened considerably, the relationship between investment in new capital and investment in acquisitions became negative. It proves that companies faced a trade-off between two investment forms. Moreover, acquisitions became dependent on company’s profitability. Therefore, the trade-off can be more severe in developing economies since they are more dependent on external financing. These results can provide policy implications given the new understanding of financial constraint significance for investment.
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.