Advanced Search
MyIDEAS: Login

Performance of business groups: Evidence from post-crisis Russia

Contents:

Author Info

  • Shumilov, Andrei

    ()
    (BOFIT)

Abstract

Transition economies like Russia lack properly functioning financial markets and institutions, which results in severe agency and information problems. Business groups in such markets have the potential to offer benefits to member firms, but they also may destroy value. Using a unique database on membership in Russian business groups, we analyze the relationship between group affiliation and firm performance on the basis of a large panel of manufacturing firms for the period 1999-2002. We find that group membership has a positive effect on productive efficiency, but gains from improved productivity in group affiliates do not adequately translate into higher profitability. This is consistent with the expropriation hypothesis, according to which controlling owners of groups extract private benefits by siphoning profits from their members. Among the different group categories delineated by type of controlling owner, the extent of profit dissipation is especially large in groups controlled by private domestic owners, who face a greater risk of possible future expropriation of property. Finally, we examine two potential sources of benefits of membership in business groups: mutual insurance among affiliated firms and preferential treatment from the state via subsidies and tolerated tax arrears. We find that, during the period studied, groups neither provided mutual insurance nor did they receive larger support from the state than unaffiliated firms. Together with findings from the previous literature indicating that, prior to the 1998 financial crisis, group firms benefited from more efficient allocation of capital within groups than in the rest of the economy but not after the crisis, our results suggest that the advantages of group membership recede as the economic and institutional environment gradually improves.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp2408.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 24/2008.

as in new window
Length: 63 pages
Date of creation: 25 Nov 2008
Date of revision:
Handle: RePEc:hhs:bofitp:2008_024

Contact details of provider:
Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Email:
Web page: http://www.suomenpankki.fi/bofit_en/
More information through EDIRC

Related research

Keywords: business groups; firm performance; transition economy; Russia;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Irina Slinko & Ekaterina Zhuravskaya & Evgeny Yakovlev, 2005. "Laws for Sale: Evidence from Russia," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 284-318.
  2. Andrei Shumilov & Natalya Volchkova, 2004. "Russian business groups: substitutes for missing institutions?," Working Papers w0050, Center for Economic and Financial Research (CEFIR).
  3. J. David Brown & John S. Earle & Almos Telegdy, 2004. "Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia and Ukraine," IEHAS Discussion Papers 0425, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  4. A. Muravyev., 2003. "Federal State Shareholdings in Russian Companies," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
  5. G. Alfandari & M.E. Schaffer, 1996. ""Arrears" in the Russian Enterprise Sector," CERT Discussion Papers 9608, Centre for Economic Reform and Transformation, Heriot Watt University.
  6. Raghuram Rajan & Henri Servaes & Luigi Zingales, 2000. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(1), pages 35-80, 02.
  7. Sergei Guriev & Andrei Rachinsky, 2005. "The Role of Oligarchs in Russian Capitalism," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 131-150, Winter.
  8. Alvaro Cuervo-Cazurra, 2006. "Business groups and their types," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 419-437, December.
  9. Volchkova Natalya, 2001. "Does Financial-Industrial Group Membership Affect Fixed Investment? Evidence from Russia," EERC Working Paper Series 01-03e, EERC Research Network, Russia and CIS.
  10. Arnold, Jens & Smarzynska Javorcik, Beata, 2005. "Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia," CEPR Discussion Papers 5065, C.E.P.R. Discussion Papers.
  11. Ksenia Yudaeva & Konstantin Kozlov & Natalia Melentieva & Natalia Ponomareva, 2003. "Does foreign ownership matter?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 383-409, 09.
  12. Maria Ponomareva & Ekaterina Zhuravskaya, 2004. "Federal tax arrears in Russia "Liquidity problems, federal redistribution or regional resistance?"," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(3), pages 373-398, 09.
  13. Earle, John S & Estrin, Saul, 1997. "After Voucher Privatization: The Structure of Corporate Ownership in Russian Manufacturing Industry," CEPR Discussion Papers 1736, C.E.P.R. Discussion Papers.
  14. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  15. Serguey Braguinsky & Roger Myerson, 2007. "Capital and growth with oligarchic property rights," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 676-704, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Wandel, Jürgen, 2011. "Integrierte Strukturen im Agrar- und Ernährungssektor Russlands: Entstehungsgründe, Funktionsweise, Entwicklungsperspektiven und volkswirtschaftliche Auswirkungen. Band I und II," Studies on the Agricultural and Food Sector in Central and Eastern Europe, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO), volume 63, number 63.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hhs:bofitp:2008_024. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Päivi Määttä).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.