Profit or Politics? Understanding Renationalizations in Russia
37 Pages Posted: 2 Mar 2010 Last revised: 9 Mar 2016
Date Written: November 12, 2009
This study tests alternative hypotheses about firm-level determinants of the government incentives to acquire controlling stakes in private companies. Using a novel hand-collected dataset of 153 largest listed and unlisted Russian companies, I investigate the economic and political rationale of a 2004-2008 wave of selected nationalizations and provide new evidence on the methods and characteristics of such takeovers in a post-privatization emerging market. I find that formerly privatized companies in strategically important sectors face the highest risks of corporate control transfers from private to state hands. I also find that contrary to commonly held beliefs, there is little evidence that renationalizations in Russia are driven by economic factors: the government neither systematically “cherry-picks” best performers nor addresses market failures by rescuing underperformers. These results contribute to the politics and finance literature by providing new firm-level evidence on the importance of political rationale in the government’s decision to intervene into the corporate control structures.
Keywords: Nationalization, Political economy, Strategic sectors, National champions, Russia
JEL Classification: F52, G34, L33, P26
Suggested Citation: Suggested Citation