Skip to main content
SpringerLink
Log in

Ownership Structure, Cash Constraints and Investment Behaviour in Russian Family Firms

  • Chapter
Family Businesses in Transition Economies

Abstract

In this chapter, using a large representative panel dataset of 8,637 large firms in the European part of Russia and their balance sheet information over the period 2000–2004, we investigate the extent to which Russian firms and in particular a smaller sample of family firms are liquidity constrained in their investment behaviour and how ownership structure changes the relationship between internal funds and the investment decisions of these firms. Family firms differ from nonfamily firms due to the unique influence of family members in ownership, strategic control and succession and play a critical role in most economies throughout the world. We estimate a structural financial accelerator model of investment and first test the hypothesis that Russian firms overall and family firms in particular are cash constrained by conducting random-effects estimation. Our results confirm that firms are liquidity constrained when the ownership structure is not included in the econometric specifications. With regards to the ownership structure and the degree of ownership concentration, we find that companies owned by private individuals and families are less cash constrained, which is in agreement with previous literature. We also find that state-owned companies are less cash constrained, independently of whether their ownership structure is concentrated. No significant impact is found for banks and institutions.

We are grateful to the participants in the AFE 2011 conference on Samos Island, Greece, the 10th EACES Conference in Moscow, the CICM 2009 conference at London Metropolitan University, BAFA 2012 conference in Brighton, the departmental research seminar as well as the 1st CROG conference at Leicester Business School at DMU, and to Ismail Adelopo, Phil Almond, Panagiotis Andrikopoulos, Ashley Carreras, Anthony Ferner, Tomila Lankina, Fred Mear, Tomek Mickiewisz, Alexander Muravyev, and especially to Pasquale Scaramozzino for helpful comments and suggestions on the previous versions. The usual caveat applies.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 39.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 54.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    In terms of the group trading at a discounted value relative to a control group; lower Tobin’s Q; suboptimal allocation of resources across divisions.

  2. 2.

    “This scheme envisaged that banks would acquire the state-owned shares in 21 bluechip public companies as collateral for granting credits to the federal government. Twelve auctions were implemented under this scheme, bringing total revenue of 5.1 trillion roubles to the federal government (Radygin et al. 2003).”

  3. 3.

    \( {\theta}_t=1 \) could also reflect stationarity in the cash constraint. However, it does not change the implications for the main hypothesis of this paper.

  4. 4.

    A discussion of the relative merits of Cash Stock (Cash Flow + Marketable Securities + Inventories) versus Cash Flow variables can be found in Love (2003). Cash Stock is less correlated with the “fundamentals” in the model, i.e. with the marginal profitability of capital.

  5. 5.

    Love (2003).

  6. 6.

    It is worth noting that the regulations regarding financial reporting can vary across the countries covered by Amadeus and hence a degree of error is unavoidable.

  7. 7.

    Although, for taxation purposes, some firms may have reported profits realized in the hydrocarbons sector as profits derived from other commercial activities not directly related to the hydrocarbons sector (World Bank 2004). In this case results obtained while controlling for NACE codes might still be biased.

  8. 8.

    The classification of ownership can be very complex for larger organisations and for multinational corporations. A more detailed description of how Amadeus classifies ownership variables is available from www.bvdep.com.

  9. 9.

    We assume away the possibility of corner solutions to the Euler equation. Aguirregabiria (1997) provides a comprehensive discussion of potential biases induced by the discrete choice problem.

  10. 10.

    However, for the latter two, we interpret this result with caution due to the small number of such companies in the sample.

References

  • Aguirregabiria, V. (1997). Estimation of dynamic programming models with censored dependent variables. Investigaciones Economicas, XXI(2), 167–208.

    Google Scholar 

  • Almeida, H., Campello, M., & Weisbach, M. (2004). The cash flow sensitivity of cash. Journal of Finance, 59(4), 1777–1804.

    Article  Google Scholar 

  • Amore, M. D., Minichilli, A., & Corbetta, G. (2011). How do managerial successions shape corporate financial policies in family firms? Journal of Corporate Finance, 17(4), 1016–1027.

    Article  Google Scholar 

  • Anderson, R. C., & Reeb, D. M. (2003). Founding family ownership and firm performance: Evidence from the S&P 500. Journal of Finance, 58(3), 1308–1328.

    Article  Google Scholar 

  • Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297.

    Article  Google Scholar 

  • Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51.

    Article  Google Scholar 

  • Astrachan, J. H., & Zellweger, T. (2008). Performance of family firms: A literature review and guidance for future research. Zeitschrift fur KMU und Entrepreneurship, 56(1/2), 1–22.

    Article  Google Scholar 

  • Audretsch, D. B., & Elston, J. A. (2002). Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany. International Journal of Industrial Organization, 20, 1–17.

    Article  Google Scholar 

  • Aukutsionek, S., & Batyaeva, A. (2000). Investment and non-investment in the Russian industry. Journal of East-West Business, 6(4), 5–22.

    Google Scholar 

  • Baltagi, H. B. (2008). Econometric analysis of panel data (4th ed.). Chichester: Wiley.

    Google Scholar 

  • Banalieva, E. R., Eddleston, K. A., & Zellweger, T. M. (2014). When do family firms have an advantage in transitioning economies? Toward a dynamic institution‐based view. Strategic Management Journal. doi:10.1002/smj.2288.

  • Barontini, R., & Caprio, L. (2006). The effect of family control on firm value and performance: Evidence from continental Europe. European Financial Management, 12, 689–723.

    Article  Google Scholar 

  • Barth, E., Gulbrandsen, T., & Schone, P. (2005). Family ownership and productivity: The role of owner-management. Journal of Corporate Finance, 11, 107–127.

    Article  Google Scholar 

  • Basco, R., & Rodriguez, M. J. P. (2009). Studying the family enterprise holistically: Evidence for integrated family and business systems. Family Business Review, 22(1), 82–95.

    Article  Google Scholar 

  • Baum, C. F., Schafer, D., & Talavera, O. (2011). The impact of financial structure on firms’ financial constraints: A cross-country analysis. Journal of International Money and Finance, 30, 678–691.

    Article  Google Scholar 

  • Bertrand, M., Mehta, P., & Mullainathan, S. (2002). Ferreting out tunneling: An application to Indian business groups. Quarterly Journal of Economics, 117, 121–148.

    Article  Google Scholar 

  • Borheim, S. (2000). The organizational form of family business. Massachusetts: Kluwer.

    Google Scholar 

  • Buccellato, T., & Mickiewicz, T. (2007). Oil and gas: A blessing for few hydrocarbons and within-region inequality in Russia”, Economics Working Paper No. 80, UCL SSEES, September.

    Google Scholar 

  • Buck, T. (2003). Modern russian corporate governance: Convergent forces or product of Russia’s history? Journal of World Business, 38, 299–313.

    Article  Google Scholar 

  • Buck, T., Filatochev, I., & Wright, M. (1998). Agents, stakeholders and corporate Russian firms. Journal of Management Studies, 35, 81–104.

    Article  Google Scholar 

  • Castillo, J., & Wakefield, M. (2007). An exploration of firm performance factors in family businesses: Do families value only the bottom line? Journal of Small Business Strategy, 17(2), 37–51.

    Google Scholar 

  • Chrisman, J. J., Chua, J. H., & Sharma, P. (2005). Trends and directions in the development of a strategic management theory of the family firm. Entrepreneurship Theory and Practice, 29(5), 555–575.

    Article  Google Scholar 

  • Claessens, S., Djankov, S., & Lang, L. (2000). The separation of ownership and control in East Asian Corporations. Journal of Financial Economics, 58, 81–112.

    Article  Google Scholar 

  • Collins, L., & O’Regan, N. (2010). The evolving field of family business. Journal of Family Business Management, 1(1), 5–13.

    Article  Google Scholar 

  • Cronqvist, H., & Nilsson, M. (2003). Agency costs of controlling minority shareholders. Journal of Financial and Quantitative Analysis, 38, 695–719.

    Article  Google Scholar 

  • Cucculelli, M., & Micucci, G. (2008). Family succession and firm performance: Evidence from Italian family firms. Journal of Corporate Finance, 14(1), 17–31.

    Article  Google Scholar 

  • Estrin, S. (2002). Competition and corporate governance in transition. Journal of Economic Literature, 16(1), 101–124.

    Google Scholar 

  • Estrin, S., & Wright, M. (1999). Corporate governance in the former Soviet Union: An overview. Journal of Comparative Economics, 27(3), 398–421.

    Article  Google Scholar 

  • Fazzari, S. M., Hubbard, R. G., Petersen, B. C., Blinder, A. S., & Poterba, J. M. (1988). Financing constraints and corporate investment. Brooking Papers on Economic Activity, 1, 141–206.

    Article  Google Scholar 

  • Fazzari, S. M., Hubbard, R. G., & Petersens, B. C. (2000). Financing constraints and corporate investment: Response to Kaplan and Zingales. Quarterly Journal of Economics, 115(2), 695–705.

    Article  Google Scholar 

  • Gedajlovic, E., & Carney, M. (2010). Markets, hierarchies, and families: Toward a transaction cost theory of the family firm. Entrepreneurship: Theory and Practice, 34(6), 1145–1172.

    Google Scholar 

  • Gilchrist, S., & Himmelberg, C. (1998) Investment, fundamentals, and finance. NBER Macroeconomics Annual 1998, MIT Press, Cambridge, MA.

    Google Scholar 

  • Gugler, K., & Peev, E. (2010). Institutional determinants of investment-cash flow sensitivities in transition economies. Comparative Economic Studies, 52(1), 62–81.

    Article  Google Scholar 

  • Guriev, S., Lazareva, O., Rachinsky, A., & Tsukhlo, S. (2003) Corporate governance in Russian industry, Working Paper Centre for Economic and Financial Research, Moscow.

    Google Scholar 

  • Holtz-Eakin, D., Newey, W., & Rosen, H. (1988). Estimating vector autoregressions with panel data. Econometrica, 56(6), 1371–1395.

    Article  Google Scholar 

  • Johnson, J. (1997). Understanding Russia’s emerging financial–industrial groups. Post-Soviet Affairs, 13(4), 333–365.

    Google Scholar 

  • Judge, W., Naoumova, I., & Koutzevol, N. (2003). Corporate governance and firm performance in Russia: An empirical study. Journal of World Business, 38(4), 385–396.

    Article  Google Scholar 

  • Kaplan, S. N., & Zingales, L. (1997). Do investment-cash flow sensitivities provide useful measures of financing constraints? The Quarterly Journal of Economics, 112(1), 169–215.

    Article  Google Scholar 

  • Kaplan, S., & Zingales, L. (2000). Investment-cash flow sensitivities are not valid measures of financing constraints. The Quarterly Journal of Economics, 115, 707–712.

    Article  Google Scholar 

  • Kochetygova, J., Popivshchy, N., & Vitalieva, V. (2004). Corporate governance in Russia analytical report. Corporate Ownership and Control, 1(2), 156–166.

    Google Scholar 

  • KPMG. (2013). The world of corporate governance: Russia. Audit Committee News. Edition 43, Q4/2013.

    Google Scholar 

  • Lee, J. (2006). Family firm performance: Further evidence. Family Business Review, 19, 103–114.

    Article  Google Scholar 

  • Love, I. (2003). Financial development and financing constraints: International evidence from the structural investment model. The Review of Financial Studies, 16(3, Fall), 765–791.

    Article  Google Scholar 

  • Maury, B. (2006). Family ownership and firm performance: Empirical evidence from Western European corporations. Journal of Corporate Finance, 12, 321–341.

    Article  Google Scholar 

  • McCarthy, D. J., & Puffer, S. M. (2003). Corporate governance in Russia: A framework for analysis. Journal of World Business, 38, 397–415.

    Article  Google Scholar 

  • Megginson, W., & Netter, J. (2001). From state to market: A survey of empirical studies on privatization. Journal of Economic Literature, 39(2), 321–389.

    Article  Google Scholar 

  • Meyer, K. (2003). Privatisation and corporate governance in Eastern Europe: The emergence of stakeholder capitalism. Keynote address, Chemnitz East Forum, 19–22 March 2003. Working Paper. http://www.klausmeyer.co.uk/publications/2003_meyer_chemnitz.pdf

  • Mickiewicz, T. (2006). Corporate governance in Russia and Poland in comparative perspective: An introduction. In T. Mickiewicz (Ed.), Corporate governance and finance in Poland and Russia (pp. 3–22). Basingstoke: PalgraveMacmillan.

    Google Scholar 

  • Mickiewicz, T., Bishop, K., & Varblane, U. (2004). Financial constraints in investment. Panel data results from Estonia, 1995–1999. Acta Oeconomica, 54(4), 425–449.

    Article  Google Scholar 

  • Miller, D., Le Breton-Miller, I., Lester, R. H., & Cannella, A. A. (2007). Are family firms really superior performers? Journal of Corporate Finance, 13, 829–858.

    Article  Google Scholar 

  • Miller, D., Le Breton-Miller, I., & Lester, R. (2010). Family ownership and acquisition behavior in publicly traded companies. Strategic Management Journal, 31, 201–223.

    Google Scholar 

  • Monsen, R. J., Chiu, J., & Cooley, D. E. (1968). The effect of separation of ownership and control on the performance of the large firm. Quarterly Journal of Economics, LXXXV11, 435–451.

    Article  Google Scholar 

  • Perez-Gonzalez, F. (2006). Inherited control and firm performance. The American Economic Review, 96(5), 1559–1588.

    Article  Google Scholar 

  • Perotti, E. (2000). The 1998 Russian Meltdown: Microfoundations of a systemic collapse. Amsterdam: Mimeo, University of Amsterdam.

    Google Scholar 

  • Perotti, E., & Gelfer, S. (2001). Red barons or robber barons? Governance and investment in Russian financial-industrial groups. European Economic Review, 45, 1601–1617.

    Article  Google Scholar 

  • Pindado, J., Requejo, I., & de la Torre, C. (2011). Family control and investment-cash flow sensitivity: Empirical evidence from the Euro zone. Journal of Corporate Finance, 17(4), 1389–1409.

    Article  Google Scholar 

  • Radygin, A., Entov, R., & Shmeleva, N. (2003). Problems of mergers and takeovers in the Russian corporate sector. Problems of Economic Transition, 46(7), 5–64.

    Google Scholar 

  • Randoy, T., & Goel, S. (2003). Ownership structure, founder leadership, and firm performance in Norwegian SME’s: Implications for financing entrepreneurial opportunities. Journal of Business Venturing, 18(5), 619–637.

    Article  Google Scholar 

  • Rozinskii, I. (2002) Mekhanizmy polucheniya dokhodov i korporativnoe upravlenie v rossiiskoi ekonomike. In Predpriyatiya Rossii: Korporativnoe Upravlenie i Rynochnye Sdelki: Institutsionalinye Problemy Rossiiskoi Ekonomiki, Tom 1 (pp. 168–182). Moscow: Gosudarstvennyi Universitet – Vysshaya Shkola Ekonomiki (in Russian).

    Google Scholar 

  • Scaramozzino, P. (1997). Investment irreversibility and finance constraints. Oxford Bulletin of Economics and Statistics, 59(1), 0305–9049.

    Article  Google Scholar 

  • Schulze, W. S., Lubatkin, M. H., & Dino, R. N. (2003). Exploring the agency consequences of ownership dispersion among the directors of private family firms. Academy of Management Journal, 46(2), 174–194.

    Article  Google Scholar 

  • Shama, A. (2001). Private sector management: The case of Russia. Journal of Small Business Management, 39(2), 183–192.

    Article  Google Scholar 

  • Smith, B. F., & Amoako-Adu, B. (1999). Management succession and financial performance of family controlled firms. Journal of Corporate Finance, 5(4), 341–368.

    Article  Google Scholar 

  • Sorenson, R. L. (1999). Conflict strategies used by successful family businesses. Family Business Review, 12(4), 325–339.

    Article  Google Scholar 

  • Sprenger, C. (2011). The choice of ownership structure: Evidence from Russian mass privatization. Journal of Comparative Economics, 39(2), 260–277.

    Article  Google Scholar 

  • Steijvers, T., Voordeckers, W., & Vanderloof, K. (2010). Collateral, relationship lending and family firms. Small Business Economics, 34, 243–259.

    Article  Google Scholar 

  • Villalonga, B., & Amit, R. (2006). How do family ownership, control and management affect firm value? Journal of Financial Economics, 80, 385–418.

    Article  Google Scholar 

  • Volchkova, N. (2000) Does financial-industrial group membership affect fixed investment: Evidence from Russia, EERC Working Paper No. 01/02.

    Google Scholar 

  • Ward, J. (1997). Growing the family business: Special challenges and best practices. Family Business Review, 10(4), 323–337.

    Article  Google Scholar 

  • Wei, K. C. J., & Zhang, Y. (2008). Ownership structure, cash flow and capital investment: Evidence from East Asian economies before the financial crisis. Journal of Corporate Finance, 14, 118–132.

    Article  Google Scholar 

  • Westhead, P., & Cowling, M. (1998). Family firm research: The need for a methodological rethink. Entrepreneurship: Theory and Practice, 23(1), 31–56.

    Google Scholar 

  • World Bank. (2004). Russian Economic Report. Retrieved March, 12, 2015, from http://documents.worldbank.org/curated/en/2004/11/6690582/russian-economic-report

  • Yakovlev, A. (2001). ‘Black cash’ tax evasion in Russia: Its forms, incentives, and consequences at firm level. Europe-Asia Studies, 53(1), 33–55.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Ernst and Young, Paris, France

    Tullio Buccellato

  2. School of Slavonic and East European Studies, University College, London, UK

    Gian Fazio

  3. Department of Accounting and Finance, Leicester Business School, De Montfort University, Leicester, UK

    Yulia Rodionova

  4. Department of Strategic Management and Marketing, Leicester Business School, De Montfort University, Leicester, UK

    Natalia Vershinina

Authors
  1. Tullio Buccellato
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Gian Fazio
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Yulia Rodionova
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Natalia Vershinina
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Natalia Vershinina .

Editor information

Editors and Affiliations

  1. GSCM Montpellier Business School, Montpellier, France

    Léo-Paul Dana

  2. South-East European University, Tetovo, Macedonia

    Veland Ramadani

Rights and permissions

Reprints and permissions

Copyright information

© 2015 Springer International Publishing Switzerland

About this chapter

Cite this chapter

Buccellato, T., Fazio, G., Rodionova, Y., Vershinina, N. (2015). Ownership Structure, Cash Constraints and Investment Behaviour in Russian Family Firms. In: Dana, LP., Ramadani, V. (eds) Family Businesses in Transition Economies. Springer, Cham. https://doi.org/10.1007/978-3-319-14209-8_12

Download citation

Publish with us

Policies and ethics

Search

Navigation