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Does Financial-Industrial Group Membership Affect Fixed Investment: Evidence from Russia

Author

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  • Natalya Volchkova

    (New Economic school/CEFIR)

Abstract

The current research estimates the accelerator type model of fixed investment using a Russian industrial enterprise dataset . This dataset contains individual firms’ accounting data for 1996 and 1997. The sample of firms was divided into three subsamples based on the ownership structure data. Registered Financial-Industrial Groups, unregistered Financial-Industrial Groups and non-group subsets were analyzed in order to compare sensitivities of investment to changes in internal liquidity in these three sets of firms. Controlling for size and investment opportunities it was found that in 1996-1997 the firms in unregistered groups invest a larger proportion of their retained earnings relative to the rest of the economy. We interpret this result as a proof of the hypothesis of better contract enforcement in unofficial groups compared to the rest of economy in the situation of lack of external financing of investment.

Suggested Citation

  • Natalya Volchkova, 2001. "Does Financial-Industrial Group Membership Affect Fixed Investment: Evidence from Russia," Working Papers w0009, Center for Economic and Financial Research (CEFIR).
    • Handle: RePEc:cfr:cefirw:w0009
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    References listed on IDEAS

    as
    1. Lubomir Lizal & Jan Svejnar, 1997. "Enterprise Investment During the Transition: Evidence from Czech Panel Data," William Davidson Institute Working Papers Series 60, William Davidson Institute at the University of Michigan.
    2. Shin, Hyun-Han & Park, Young S., 1999. "Financing constraints and internal capital markets: Evidence from Korean 'chaebols'," Journal of Corporate Finance, Elsevier, vol. 5(2), pages 169-191, June.
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    4. Ronald Anderson and Chantal Kegels & Ronald Anderson and Chantal Kegels, 1997. "Finance and Investment in Transition: Czech Enterprises, 1993-1994," William Davidson Institute Working Papers Series 164, William Davidson Institute at the University of Michigan.
    5. Anderson, Ronald & Kegels, Chantal, 1997. "Finance and Investment in Transition : Czech Enterprises, 1993-1994," LIDAM Discussion Papers IRES 1997015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    6. Peter K. Clark, 1979. "Investment in the 1970s: Theory, Performance, and Prediction," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 73-124.
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    Citations

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    Cited by:

    1. Andrei Shumilov & Natalya Volchkova, 2004. "Russian business groups: substitutes for missing institutions?," Working Papers w0050, New Economic School (NES).
    2. Erik Berglof & Patrick Bolton, 2002. "The Great Divide and Beyond: Financial Architecture in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 77-100, Winter.
    3. Shumilov, Andrei, 2008. "Performance of business groups: evidence from port-crisis Russia," BOFIT Discussion Papers 24/2008, Bank of Finland Institute for Emerging Economies (BOFIT).
    4. Irina Denisova & Stanislav Kolenikov & Ksenia Yudaeva, 2000. "Child Benefits and Child Poverty," Working Papers w0006, Center for Economic and Financial Research (CEFIR).
    5. Bezlepkina, Irina V., 2002. "What is Behind the Fall in Russian Agricultural Production?," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24785, European Association of Agricultural Economists.
    6. Julian Fennema, 2006. "An Alternative Estimation Framework for Firm-Level Capital Investment," CERT Discussion Papers 0602, Centre for Economic Reform and Transformation, Heriot Watt University.
    7. Ichiro Iwasaki, 2007. "Enterprise Reform And Corporate Governance In Russia: A Quantitative Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(5), pages 849-902, December.
    8. Zinych, Nataliya & Odening, Martin, 2009. "How Costly are (Agricultural) Investments during Economic Transition? A Critical Literature Appraisal," 2009 Conference, August 16-22, 2009, Beijing, China 50319, International Association of Agricultural Economists.

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    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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