An empirical analysis of the influence of financialization on investment in Russia

Abstract

This paper tries to estimate the impact of financialization on fixed investment in Russia. The work is carried out by using panel data based on reports of non-financial publicly listed companies for 1999–2019. The study finds that financial expenses aimed at paying interest on external financing and paying dividends — that is, focusing on shareholder value, and hence decreasing the internal funds of companies, reduce real investments. Financial incomes have shown the crowding-out effect for large companies. Financial incomes as additional “free” funds in large companies are not perceived as an opportunity to accumulate fixed assets. Managers prefer to increase ­financial investments instead of real ones. In small and medium-sized companies, financial incomes, however, drive the growth of physical investment. This is because small firms, at a particular stage in their lives, find it more profitable to invest in their own growth. The results from the general sample, without dividing by size, indicate that financialization in Russia clearly reduces real investment.

An empirical analysis of the influence of financialization on the innovative activity of the firms’ managers in Italy

“…Assumptions made in the post-Keynesian literature have not been fully confirmed in this study. In addition, the results are not consistent with the findings of previous empirical studies by post-Keynesian authors for other countries, such as the USA (Orhangazi, 2008;Lin and Tomaskovic-Devey, 2013), some European countries (Stockhammer, 2004;Álvarez, 2012;Barradas et al, 2018, Alvarez, 2015Tori and Onaran, 2018) and Russia (Tretyakov and Rozmainsky, 2021).…”

“…Researchers not only suggest that non-financial corporations are increasingly profiting from financial activities, but also suggest that the reverse process is taking place: non-financial companies have increased payments to the financial sector through interest and dividend payments. While most of the research is focused on the USA, there are other studies that show the presence of similar processes in the European economy (Stockhammer, 2004;Álvarez, 2012;Barradas et al, 2018, Alvarez, 2015Tori and Onaran, 2018) as well as in Russia (Tretyakov and Rozmainsky, 2021).…”

“…Financialization can also be viewed from a behavioral perspective, as it can change some norms of economic behavior of economic entities, norms that affect the assessment of the future time. Some authors find financialization to be encouraging people to focus on high short-term economic outcomes (Kuzmina and Rozmainsky, 2020;Tretyakov and Rozmainsky, 2021). At the same time, this is found to be especially applicable to managers of firms who seek to raise the market value of the financial assets of these firms as high as possible in exchange for some "bonuses" from shareholders.…”

“…Studies of the implications of financialization mainly concern its impact on corporations' investment behavior, and many have already been carried out in some countries of the developed world, such as the US (Orhangazi, 2008;Lin and Tomaskovic-Devey, 2013), peripheral countries (Cibils and Allami, 2013;Rodrigues et al, 2016), some European countries (Stockhammer, 2004;Álvarez, 2012;Barradas et al, 2018;Alvarez, 2015;Tori and Onaran, 2018;Kuzmina and Rozmainsky, 2020) and Russia (Tretyakov and Rozmainsky, 2021). For Italy, such an analysis has been carried out as well due to the actuality of the issue for this country.…”