Complex state ownership, competition, and firm performance – Russian evidence

Abstract

Purpose -State ownership has been common especially in industries with restricted competition. In Russia, state-controlled firms represent around 41 percent of the market value of all listed firms (Deloitte, 2015). Yet, there is a significant gap in the literature regarding the effects of various forms of government control in listed firms. The purpose of this paper is to fill this gap by exploring the impact of the complexity of state ownership and competition on the performance of Russian listed firms. Design/methodology/approach -The sample consists of data for 72 firms (360 firm-years) in the Russian MOEX broad market index during 2011-2015. The complexity of state ownership is captured by studying forms of state control including majority/minority, direct/indirect, federal/regional, mixed structures and golden shares. Findings -The authors find significant differences in performance relating to different forms of state ownership. State control is negatively related to firm valuation and the sales/employees ratio. Performance is weakest when state ownership takes the form minority, regional or direct ownership. State control through golden shares typically outperforms other state-controlled firms. The authors find indications of employment prioritization beyond the economical optimum. In addition, the relation between state ownership and profitability becomes positive in sectors where state firms appear to enjoy lower competition. Originality/value -While the effects of state ownership have been studied on many markets, there is a lack of studies on the effects of different forms, or the complexity, of state ownership beyond direct and indirect ownership. The authors contribute to the literature on the performance effects of state ownership by studying a multitude of forms of governmental ownership as well as the role of competition in Russia. Especially the profitability of state-controlled firms is significantly affected by industry characteristics. Implications of the results are discussed both from firm and policy maker perspectives.

Corporate Governance, Corporate Social Responsibility and Financial Performance, CGPI Award in Indonesia

“…This finding is not in line with previous research which says that CSR has a positive and significant effect on a company s financial performance [24,19]. The results of this research are also not in accordance with research which says that CSR disclosure has a positive effect on ROA [25], besides that there are studies that say that CSR has a significant influence on Return On Assets [26][27][28]. The results of this study are also not in line with research which states that there is a significant positive relationship between CSR disclosure and Islamic bank financial performance [29].…”

Confucianism culture and corporate cash holdings

“…Therefore, agency conflicts are less severe in SOEs (Jiang et al, 2010). Furthermore, a high state ownership allows firms to easily access credit from state-owned banks since they are subject to soft budget constraints (Cai et al, 2016;Liljeblom et al, 2019;Li et al, 2019). In this case, firms keep lower level of cash reserves (Amess et al, 2015;Cull and Xu, 2000;Lin and Tan, 1999).…”

Corruption and innovation: the importance of competition

“…Previous work has already established that better governance increases entrepreneurial activity and innovation (Zapata-Cantu, 2020; Klarin and Ray, 2019; Klapper et al , 2010), international investment (Ipek and Tanyeri, 2020; Lanfranchi et al , 2020), regulatory quality (Mukherjee and Dutta, 2018) and sustained economic growth (Asadullah and Chakravorty, 2019). On the other hand, weak governance can lead to competitive rent-seeking in the form of corruption (Krueger, 1974), especially in young democracies, which exhibit less rule of law and lower bureaucratic quality (Kapstein and Converse, 2008; Keefer, 2007) and in less competitive, state-dominated sectors (Liljeblom et al , 2020).…”