Corporate Governance System and Regional Heterogeneity: Evidence from East and West Russia

Using a unique firm-level dataset obtained from a large-scale questionnaire survey conducted in late 2015, we examined the generality and heterogeneity of corporate governance systems between the eastern and western regions of Russia. The survey results strongly suggest that the governance system in the surveyed firms is generally characterized by: the dominance of closed corporate forms, the polarization trend in boards of directors and audit committees in terms of their independence from senior management, the reluctance to employ independent directors or expert auditors, and the strong preference for local auditors and indigenous audit firms as external auditors. At the same time, however, we also found that the probability of establishment of the governance bodies, appointment of independent directors and expert auditors, and execution of external audit in the eastern companies is significantly lower than that in the western counterparts. This finding is robust, even after a series of firm-level attributes are simultaneously controlled for.