Firm financial architecture and corporate performance in Russia (working book title)

The authors: Irina Ivashkovskaya (NRU HSE)
Joseph McCahery (Tilburg University)
Anastasia Stepanova (NRU HSE)

Abstract

As of now, a great deal of papers is devoted to the performance effect of one or another corporate governance issues like foreign ownership, board size or independency. All these studies provide us with the so-called ‘stylized models’ that prove a separate hypothesis and explain the influence of an exact separate governance characteristic over performance. But the knowledge of the interrelations between these non-financial characteristics remains quite limited. In this book, we consider a company's financial architecture as a system of interrelated mechanisms including ownership structure, legal form, capital structure and corporate governance. We study the influence of corporate financial architecture on the firm performance starting from its market capitalization to the company’s default probability. First, to address the lack of research in corporate performance modelling in large emerging markets we contribute to the literature by introducing analysis of corporate financial architecture and market performance of companies in Russia. Second, we pay specific attention to the question of the endogenous character of the company's ownership structure that is of extreme importance in emerging markets where the privatization process is a part of the recent history. Third, we develop a methodology based on cluster analysis that enables us to demonstrate the existence of sustainable types of financial architecture in a homogenous business environment. Finally, we study specific non-financial drivers of firm performance in times of global financial crisis.