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Does Corporate Governance Reform Necessarily Boost Firm Performance? Recent Evidence from Russia

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  • Kuznecovs, Mihails

    () (University of Surrey)

  • Pal, Sarmistha

    () (University of Surrey)

Abstract

This paper examines whether the introduction of corporate governance (CG) reforms in general and that of transparency and disclosure (T&D) rules in particular can necessarily boost firm performance. Existing literature suggests that CG reforms can boost performance because it can resolve the conflict of interest between the controlling and the minority owners, especially in societies with highly skewed distribution of ownership. We however argue that the success of CG reform would, in addition, depend on whether the reforms may initiate further conflict, e.g., that between the state and the controlling owners. Using recent data from Russia for 2000-2008, we find that the introduction of corporate governance codes in Russia had limited success to improve indices of firm performance in our sample. We argue that this arises from the predatory behavior of the central and local governments: greater transparency make businesses easy targets for aggressive tax enforcement policy by the central government while the decentralized local governments may increase the bribe price to protect businesses from high central taxes, which may also induce some businesses to go underground, thus harming firm performance.

Suggested Citation

  • Kuznecovs, Mihails & Pal, Sarmistha, 2012. "Does Corporate Governance Reform Necessarily Boost Firm Performance? Recent Evidence from Russia," IZA Discussion Papers 6519, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6519
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    References listed on IDEAS

    as
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    Cited by:

    1. Sergey Solntsev, 2013. "Senior management labor market: from economic growth to crisis. The case of Russia," HSE Working papers WP BRP 10/MAN/2013, National Research University Higher School of Economics.
    2. Ararat, Melsa & Black, Bernard S. & Yurtoglu, B. Burcin, 2017. "The effect of corporate governance on firm value and profitability: Time-series evidence from Turkey," Emerging Markets Review, Elsevier, vol. 30(C), pages 113-132.

    More about this item

    Keywords

    corporate governance reform; transparency and disclosure rules; conflict between state and the controlling owner; taxation and fiscal decentralisation; firm performance; predatory state; Tobin's Q; Russia;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • K2 - Law and Economics - - Regulation and Business Law
    • P2 - Economic Systems - - Socialist Systems and Transition Economies

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