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Does Financial-Industrial Group Membership Affect Fixed Investment? Evidence from Russia

Author

Listed:
  • Volchkova Natalya
Abstract
The current research estimates the accelerator type model of fixed investment using a Russian industrial enterprise dataset for 1996 and 1997. The sample of firms was divided into two subsamples based on the ownership structure data. Unregistered Financial-Industrial Groups and non-group subsets were analyzed in order to compare sensitivities of investment to changes in internal liquidity between these sets of firms. Controlling for size and investment opportunities it was found that in 1996-1997 the firms in unregistered groups invested a larger proportion of their retained earnings relative to the rest of the economy. We interpret this result as a proof of the hypothesis of better contract enforcement in unofficial groups compared to the rest of economy in the situation of lack of external financing of investment.

Suggested Citation

  • Volchkova Natalya, 2001. "Does Financial-Industrial Group Membership Affect Fixed Investment? Evidence from Russia," EERC Working Paper Series 01-03e, EERC Research Network, Russia and CIS.
    • Handle: RePEc:eer:wpalle:01-03e
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    References listed on IDEAS

    as
    1. Lubomir Lizal & Jan Svejnar, 1997. "Enterprise Investment During the Transition: Evidence from Czech Panel Data," William Davidson Institute Working Papers Series 60, William Davidson Institute at the University of Michigan.
    2. Shin, Hyun-Han & Park, Young S., 1999. "Financing constraints and internal capital markets: Evidence from Korean 'chaebols'," Journal of Corporate Finance, Elsevier, vol. 5(2), pages 169-191, June.
    3. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    4. Peter K. Clark, 1979. "Investment in the 1970s: Theory, Performance, and Prediction," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 73-124.
    5. Ronald Anderson and Chantal Kegels & Ronald Anderson and Chantal Kegels, 1997. "Finance and Investment in Transition: Czech Enterprises, 1993-1994," William Davidson Institute Working Papers Series 164, William Davidson Institute at the University of Michigan.
    6. Anderson, Ronald & Kegels, Chantal, 1997. "Finance and Investment in Transition : Czech Enterprises, 1993-1994," LIDAM Discussion Papers IRES 1997015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Andrei Shumilov & Natalya Volchkova, 2004. "Russian business groups: substitutes for missing institutions?," Working Papers w0050, New Economic School (NES).
    2. Erik Berglof & Patrick Bolton, 2002. "The Great Divide and Beyond: Financial Architecture in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 77-100, Winter.
    3. Irina Denisova & Stanislav Kolenikov & Ksenia Yudaeva, 2000. "Child Benefits and Child Poverty," Working Papers w0006, Center for Economic and Financial Research (CEFIR).
    4. Julian Fennema, 2006. "An Alternative Estimation Framework for Firm-Level Capital Investment," CERT Discussion Papers 0602, Centre for Economic Reform and Transformation, Heriot Watt University.
    5. Ichiro Iwasaki, 2007. "Enterprise Reform And Corporate Governance In Russia: A Quantitative Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(5), pages 849-902, December.
    6. Bezlepkina, Irina V., 2002. "What is Behind the Fall in Russian Agricultural Production?," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24785, European Association of Agricultural Economists.
    7. Zinych, Nataliya & Odening, Martin, 2009. "How Costly are (Agricultural) Investments during Economic Transition? A Critical Literature Appraisal," 2009 Conference, August 16-22, 2009, Beijing, China 50319, International Association of Agricultural Economists.

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    More about this item

    Keywords

    Russia; accelerator model of fixed business investment; investment- cash flow sensitivity; Financial-Industrial Groups;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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