Investing in Insider-Dominated Firms: A Study of Russian Voucher Privatization Funds

Corporate Governance in Central Europe and Russia, Vol. 1:Banks, Funds, and Foreign Investors (Roman Frydman, Cheryl W. Gray & Andrzej Rapaczynski eds., Central European University Press 1996)

Posted: 3 Jul 1998

See all articles by Roman Frydman

Roman Frydman

New York University (NYU) - Department of Economics

Katharina Pistor

Columbia University School of Law

Andrzej Rapaczynski

Columbia Law School

Abstract

This paper is based on a survey of 148 Russian privatization investment funds representing, in terms of size, 69 percent of all investment funds created in connection with the voucher privatization of about 14,000 state enterprises. The investment funds surveyed hold shares in about 5,000 privatized enterprises, thus providing a window into the world of corporate governance of a substantial portion of Russian firms. The paper argues that investment funds, like most other outside investors, have relatively small impact on the governance of Russian firms due to the firms' domination by corporate insiders, particularly management. Given high returns from shareholder activism, the investment funds attempt to influence the firms in their portfolios in a variety of ways (through obtaining board seats and providing them with a range of services), but have extremely poor access to information and are largely unable to prod the firms toward more radical restructuring. In particular, the investment funds are only rarely able to effect managerial changes, although a logistic equation model used shows that firms which do participate in more that one dismissal of top managerial personnel seem to be interested in fundamental restructuring. The paper also describes the main features of the emerging Russian capital market and analyzes the determinants of the trading activity of the investment funds.

JEL Classification: G12, G14, L33, P21

Suggested Citation

Frydman, Roman and Pistor, Katharina and Rapaczynski, Andrzej, Investing in Insider-Dominated Firms: A Study of Russian Voucher Privatization Funds. Corporate Governance in Central Europe and Russia, Vol. 1:Banks, Funds, and Foreign Investors (Roman Frydman, Cheryl W. Gray & Andrzej Rapaczynski eds., Central European University Press 1996). Available at SSRN: https://ssrn.com/abstract=10026

Roman Frydman (Contact Author)

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

Katharina Pistor

Columbia University School of Law ( email )

435 West 116th Street
New York, NY 10025
United States
212-854-0068 (Phone)
212-854-7946 (Fax)

Andrzej Rapaczynski

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States
(212) 854-3421 (Phone)
(212) 854-7946 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,307
PlumX Metrics