IDEAS home Printed from https://ideas.repec.org/p/hit/rrcwps/3.html
   My bibliography  Save this paper

Economics of Corporate Form: Why Do Russian Firms Prefer to Be Closed Companies?

Author

Listed:
  • Iwasaki, Ichiro
  • 岩﨑, 一郎
  • イワサキ, イチロウ

Abstract

In Russia, an overwhelming number of joint-stock companies (JSCs) choose to become closed companies despite the fact that this corporate form strays far from the primary nature of stock companies. Using the results of a Japan-Russia joint enterprise survey conducted in 2005, we examine a variety of factors as to why Russian stock companies select to become closed companies. Our empirical results suggest the following four factors encouraging many of Russian firms to be closed JSCs: (a) a widespread insider-dominating corporate ownership structure emerging as a result of the mass-privatization policy; (b) a strong orientation among managers toward closed corporate organization due to the underdeveloped capital and managerial markets; (c) slumping needs for corporate finance; and (d) insufficient financial support from local financial institutions. The empirical relationship between corporate form and ownership structure exists, even if we assume the endogeneity of the two elements.

Suggested Citation

  • Iwasaki, Ichiro & 岩﨑, 一郎 & イワサキ, イチロウ, 2013. "Economics of Corporate Form: Why Do Russian Firms Prefer to Be Closed Companies?," RRC Working Paper Series 3, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:rrcwps:3
    Note: This paper was produced as a result of a Japan-Russia joint research project entitled “Corporate Governance and Integration Processes in the Russian Economy” launched by the Institute of Economic Research, Hitotsubashi University (Tokyo) and the Institute for Industrial and Market Studies, National Research University ? Higher School of Economics (Moscow). The research was financially supported by the Japan Securities Scholarship Foundation (JSSF) and grants-in-aid for scientific research from the Ministry of Education and Science of Japan (Nos. 16530149; 17203019; 21402025; 23243032). I also thank Naohito Abe, Tatiana G. Dolgopyatova and Andrei Yakovlev for their valuable comments and Jim Treadway for his editorial assistance. Needless to say, all remaining errors are mine., Revised version; first published in December 2007
    as

    Download full text from publisher

    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/15721/RRC_WP_No3.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gordon, Roger H. & MacKie-Mason, Jeffrey K., 1994. "Tax distortions to the choice of organizational form," Journal of Public Economics, Elsevier, vol. 55(2), pages 279-306, October.
    2. 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.
    3. Brickley, James A. & Dark, Frederick H., 1987. "The choice of organizational form The case of franchising," Journal of Financial Economics, Elsevier, vol. 18(2), pages 401-420, June.
    4. Dietmar Harhoff & Konrad Stahl & Michaerl Woywode, 1998. "Legal Form, Growth and Exit of West German Firms—Empirical Results for Manufacturing, Construction, Trade and Service Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 453-488, December.
    5. Brooks, Richard R W, 2002. "Liability and Organizational Choice," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 91-125, April.
    6. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
    7. Damodaran, Aswath & John, Kose & Liu, Crocker H., 2005. "What motivates managers?: Evidence from organizational form changes," Journal of Corporate Finance, Elsevier, vol. 12(1), pages 1-26, December.
    8. Demirguc-Kunt, Asli & Love, Inessa & Maksimovic, Vojislav, 2006. "Business environment and the incorporation decision," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2967-2993, November.
    9. Blass, Asher A & Carlton, Dennis W, 2001. "The Choice of Organizational Form in Gasoline Retailing and the Cost of Laws That Limit That Choice," Journal of Law and Economics, University of Chicago Press, vol. 44(2), pages 511-524, October.
    10. Perotti, Enrico C. & Gelfer, Stanislav, 2001. "Red barons or robber barons? Governance and investment in Russian financial-industrial groups," European Economic Review, Elsevier, vol. 45(9), pages 1601-1617, October.
    11. Douglas R. Emery & Wilbur G. Lewellen & David C. Mauer, 1988. "Tax-Timing Options, Leverage, And The Choice Of Corporate Form," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 11(2), pages 99-110, June.
    12. repec:hal:spmain:info:hdl:2441/1cu21pio6c90g9i5oedr5hnaa3 is not listed on IDEAS
    13. Mayers, David & Smith, Clifford W, Jr, 1981. "Contractual Provisions, Organizational Structure, and Conflict Control in Insurance Markets," The Journal of Business, University of Chicago Press, vol. 54(3), pages 407-434, July.
    14. Karpoff, Jonathan M. & Rice, Edward M., 1989. "Organizational form, share transferability, and firm performance : Evidence from the ANCSA corporations," Journal of Financial Economics, Elsevier, vol. 24(1), pages 69-105, September.
    15. Jens Grundei & Till Talaulicar, 2002. "Company Law and Corporate Governance of Start-ups in Germany: Legal Stipulations, Managerial Requirements, and Modification Strategies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 6(1), pages 1-27, March.
    16. Deli, Daniel N. & Varma, Raj, 2002. "Closed-end versus open-end: the choice of organizational form," Journal of Corporate Finance, Elsevier, vol. 8(1), pages 1-27, January.
    17. Harhoff, Dietmar & Stahl, Konrad & Woywode, Michael, 1998. "Legal Form, Growth and Exit of West German Firms--Empirical Results for Manufacturing, Construction, Trade and Service Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 453-488, December.
    18. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
    19. Denning, Karen C. & Shastri, Kuldeep, 1993. "Changes in Organizational Structure and Shareholder Wealth: The Case of Limited Partnerships," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(4), pages 553-564, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karbhari, Yusuf & Muye, Ibrahim & Hassan, Ahmad Fahmi S. & Elnahass, Marwa, 2018. "Governance mechanisms and efficiency: Evidence from an alternative insurance (Takaful) market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 71-92.
    2. Damodaran, Aswath & John, Kose & Liu, Crocker H., 2005. "What motivates managers?: Evidence from organizational form changes," Journal of Corporate Finance, Elsevier, vol. 12(1), pages 1-26, December.
    3. Cole, Rebel, 2011. "How do firms choose legal form of organization?," MPRA Paper 32591, University Library of Munich, Germany.
    4. Bergner, Sören Martin & Bräutigam, Rainer & Evers, Maria Theresia & Spengel, Christoph, 2017. "The use of SME tax incentives in the European Union," ZEW Discussion Papers 17-006, ZEW - Leibniz Centre for European Economic Research.
    5. Sofie Balcaen & Sophie Manigart & Hubert Ooghe, 2011. "From distress to exit: determinants of the time to exit," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 407-446, August.
    6. Daniel Fackler & Claus Schnabel & Joachim Wagner, 2013. "Establishment exits in Germany: the role of size and age," Small Business Economics, Springer, vol. 41(3), pages 683-700, October.
    7. Justo, Rachida & DeTienne, Dawn R. & Sieger, Philipp, 2015. "Failure or voluntary exit? Reassessing the female underperformance hypothesis," Journal of Business Venturing, Elsevier, vol. 30(6), pages 775-792.
    8. Takehiko Yasuda, 2005. "Firm Growth, Size, Age and Behavior in Japanese Manufacturing," Small Business Economics, Springer, vol. 24(1), pages 1-15, December.
    9. Baumöhl, Eduard & Iwasaki, Ichiro & Kočenda, Evžen, 2019. "Institutions and determinants of firm survival in European emerging markets," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 431-453.
    10. Hien Tran & Enrico Santarelli & Enrico Zaninotto, 2015. "Efficiency or bounded rationality? Drivers of firm diversification strategies in Vietnam," Journal of Evolutionary Economics, Springer, vol. 25(5), pages 983-1010, November.
    11. Kano, Kazuko & Kano, Takashi & Takechi, Kazutaka, 2013. "Exaggerated death of distance: Revisiting distance effects on regional price dispersions," Journal of International Economics, Elsevier, vol. 90(2), pages 403-413.
    12. Arnd Kölling & Claus Schnabel, 2022. "Owners, external managers and industrial relations in German establishments," British Journal of Industrial Relations, London School of Economics, vol. 60(2), pages 424-443, June.
    13. Koke, Jens, 2002. "Determinants of acquisition and failure: evidence from corporate Germany," Structural Change and Economic Dynamics, Elsevier, vol. 13(4), pages 457-484, December.
    14. Jean Bonnet & Nicolas Le Pape & Teresa Nelson, 2011. "Firm start-up strategies and performance in France: Survival and growth," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201117, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    15. Jean-Paul Azam & Kartika Bhatia, 2017. "Provoking insurgency in a federal state: theory and application to India," Public Choice, Springer, vol. 170(3), pages 183-210, March.
    16. Jarke-Neuert, Johannes & Perino, Grischa & Schwickert, Henrike, 2021. "Free-Riding for Future: Field Experimental Evidence of Strategic Substitutability in Climate Protest," SocArXiv sh6dm, Center for Open Science.
    17. Anna Piil Damm, 2009. "Ethnic Enclaves and Immigrant Labor Market Outcomes: Quasi-Experimental Evidence," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 281-314, April.
    18. Rammer, Christian & Metzger, Georg, 2010. "Unternehmensdynamik in der Wissenswirtschaft in Deutschland und im internationalen Vergleich," Studien zum deutschen Innovationssystem 10-2010, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin.
    19. Iwasaki, Ichiro & 岩﨑, 一郎 & イワサキ, イチロウ, 2007. "Endogenous board formation and its determinants in a transition economy: evidence from Russia," CEI Working Paper Series 2007-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    20. Bambio, Yiriyibin & Bouayad Agha, Salima, 2018. "Land tenure security and investment: Does strength of land right really matter in rural Burkina Faso?," World Development, Elsevier, vol. 111(C), pages 130-147.

    More about this item

    Keywords

    Russia; corporate form; corporate governance; organizational choice;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hit:rrcwps:3. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Digital Resources Section, Hitotsubashi University Library (email available below). General contact details of provider: https://edirc.repec.org/data/rrhitjp.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.