IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Performance of business groups: Evidence from post-crisis Russia

  • Shumilov, Andrei

    ()

    (BOFIT)

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.

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

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
Web page: http://www.suomenpankki.fi/bofit_en/Email:


More information through EDIRC

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. Sourafel Girma & Holger Görg, 2006. "Evaluating the foreign ownership wage premium using a difference-indifferences matching approach," The Institute for International Integration Studies Discussion Paper Series iiisdp165, IIIS.
  2. Natalya Volchkova, 2001. "Does Financial-Industrial Group Membership Affect Fixed Investment: Evidence from Russia," Working Papers w0009, Center for Economic and Financial Research (CEFIR).
  3. Raghuram Rajan & Henri Servaes & Luigi Zingales, 1998. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," NBER Working Papers 6368, National Bureau of Economic Research, Inc.
  4. 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," Upjohn Working Papers and Journal Articles 04-107, W.E. Upjohn Institute for Employment Research.
  5. Tarun Khanna & Yishay Yafeh, 2007. "Business Groups in Emerging Markets: Paragons or Parasites?," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 331-372, June.
  6. Schaffer, Mark E., 1998. "Do Firms in Transition Economies Have Soft Budget Constraints? A Reconsideration of Concepts and Evidence," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 80-103, March.
  7. Arnold, Jens Matthias & Javorcik, Beata Smarzynska, 2005. "Gifted kids or pushy parents? Foreign acquisitions and plant performance in Indonesia," Policy Research Working Paper Series 3597, The World Bank.
  8. 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.
  9. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  10. Andrei Shumilov & Natalya Volchkova, 2004. "Russian business groups: substitutes for missing institutions?," Working Papers w0050, Center for Economic and Financial Research (CEFIR).
  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. 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.
  13. 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.
  14. 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.
  15. A. Murav' Ev, 2003. "Federal State Shareholdings in Russian Companies," Problems of Economic Transition, M.E. Sharpe, Inc., vol. 46(8), pages 66-95, December.
  16. Alvaro Cuervo-Cazurra, 2006. "Business groups and their types," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 419-437, December.
  17. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
  18. Maria Ponomareva & Ekaterina Zhuravskaya, 2004. "Federal Tax Arrears in Russia: Liquidity Problems, Federal Redistribution, or Regional Resistance?," Working Papers w0003, Center for Economic and Financial Research (CEFIR).
  19. 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.
Full references (including those not matched with items on IDEAS)

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

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.