Publications

This paper analyzes why high-tech firms are less likely to have debt in their capital structure. The share of zero-leverage firms increased in the US in the Software & Services, Hardware Equipment and the Pharmaceutical & Biotechnical industries which are treated as high-tech firms in our research. We divide the sample of US-based firms from the RUSSELL 3000 index for the period from 2004 to 2015 into two groups, one of them includes only high-tech firms, another contains all other firms from the sample. Traditional determinants of corporate structure such as size, age, asset tangibility, profitability and market-to-book ratio cannot fully explain why high-tech firms choose a zero-debt policy. We found that high-tech firms are more financially constrained than non-high-tech firms. The managerial entrenchment hypothesis could not predict zero-leverage for high-tech firms, but it can partially predict the debt conservatism of non-high-tech firms. The evidence shows that the excess cash hypothesis explains why unconstrained high-tech firms have zero-leverage but does not explain it for non-high-tech firms. Finally, we did not find a significant influence of the financial flexibility hypothesis for the decision of unconstrained high-tech firms to be unlevered, while for their non-high-tech counterparts this hypothesis fits.

This study investigates the puzzle of zero-debt in emerging markets using a sample of firms from Eastern Europe during 2000-2013. The results of this paper are in line with the previous research of firms from developed markets. Firms that are financially constrained do not use debt as a result of credit rationing while financially unconstrained firms intentionally eschew debt to maintain financial flexibility and avoid underinvestment incentives. Furthermore, this study provides new insights into unconstrained firms’ performance during different economic situations. Firms that strategically avoid debt show better financial results than levered firms.

The recent restructuring of the economy has led to the fact that the leaders of information technology sector — Apple, Google, Facebook, Microsoft, Amazon — became the largest companies in the world, replacing the banking and oil and gas sectors. The emergence of a large number of technology start-ups resulted in the increase of the entrepreneurial ownership. Business founders tend to issue dual class stocks to retain control over key corporate decisions. The capital structure and the Board of Directors structure alter along with changes in the ownership structure. In many large companies, more than 90% of directors have become independent. At the same time, the diversification of the board of directors is improving by the active involvement of women in decisionmaking processes. Zero debt popularity reflect the changes in the attitude to risk. The article examines the main trends in the ownership structure of the largest US companies. The research consolidates the results of theoretical and empirical research in the field of corporate governance, capital structure and ownership structure in the developed markets. We provide the analysis of the dispersed ownership as the element of Anglo- Saxon corporate governance model based on historical trends in the ownership structure of companies in the US. The appearance of new sectors, the rapid development of entrepreneurial ownership, the return of the popularity of dual class shares, the fashion for gender diversification in the board of directors and the phenomenon of zero debt level are illustrated by case studies of actual corporations and analytical reports. We discuss all of the identified trends in terms of risk. In order to hedge the higher business risks of new sectors the top management and investors reduce debt, invite women to the board of directors and increase the degree of independence of the board of directors.

This paper aims to investigate the effect that internal corporate governance mechanisms have on the performance of commercial banks, how it differs for developed and emerging European markets, and whether it has changed as a result of the financial crisis. The key statistical tool used in the paper is the panel data analysis of the sample of 150 banks from 27 countries, over the period 2004-2011. We document the evidence partially supporting the effectiveness of smaller boards of directors, while the board independence seems to be negatively associated with the strategic performance of banks, especially in emerging markets and in times of a crisis. In emerging markets, state-owned banks appear to be more market-efficient, while high ownership concentration is considered by market players to be a negative signal. Studying the 2008 financial crisis period provides the evidence for structural movements in nonfinancial performance drivers.

R&D projects in pharmaceutical industry are extremely risky and bring benefits in long-run period. Self-interested managers try to avoid risk and underinvest in R&D. In this paper we study the effect of independent directors, insider ownership and scientific connections on R&D investments. Independent directors and insider ownership can mitigate agency problem by additional monitoring and convergence of interests. Scientific collaborations promote technological development and increase R&D. The research reveals the difference of the effects in emerging and developed market.

The article presents the algorithm allowing making country-risk adjustments to market multiples when analysts use peers from developed countries to estimate company in emerging capital market. We prove the necessity to country-risk adjustments to market multiples depending on industry where the company operates. We improve the technique of company valuation under the public-company method. Our empirical study is based on the sample of 130 Russian companies and 797 companies from developed countries over 2009-2013.

Researchers have long tried to define the impact of corporate diversification on firm value. Academic papers mainly concentrate on the effects of corporate diversification in mature markets while its consequences in emerging capital markets are less explored. This article presents the results of an empirical analysis of corporate diversification strategies of a sample of companies from BRIC countries that expanded via acquisitions during 2000–2013. We contribute to the existing literature by examining the effects of corporate diversification on firm value during the pre- and post-crisis periods. In line with other studies, we distinguish between related and unrelated diversification and in contrast to them we single out and separately analyze horizontal, conglomerate and vertical acquisitions. Based on a sample of 319 deals initiated by companies from BRIC countries, we found positive (3.32% and 9.01%) and statistically significant cumulative abnormal returns for conglomerate acquisitions during the pre- and post-crisis periods, correspondingly. We also found that the market reacts positively and statistically significant to the announcements of horizontal and vertical integration only during the pre-crisis period.

Researchers have long tried to define the impact of corporate mergers and acquisitions on company performance. We contribute to the existing literature by examining the performance of M&A deals in emerging capital markets based on the economic profit model and comparing the results with ones obtained by means of traditional method—accounting studies. Examining a sample of 80 deals initiated by companies from emerging capital markets over 2003–2009, we find that M&As are value-destroying deals for the combined firms. Results from the long-run analysis prove the negative industry-adjusted differences between post-acquisition and preacquisition performance measures. The difference is equal to a significant −3.3% for the EBITDA/sales ratio. The economic profit approach demonstrates a similar result. Economic profit has declined due to M&A deals by $4 million. We also analyze the determinants of M&A performance, such as method of payment, business similarity, and type of geographical expansion (cross-border versus local deals).

This paper presents a study of the impact of taxation on the capital structure of Russian companies, based on the Graham model. The study revealed that it is more appropriate to include the effective tax rate in the model, rather than use the marginal tax rate since it is more applicable for the Russian companies

The performance of mergers and acquisitions (M&A) is one of the key issues in corporate finance. We contribute to existing literature by examining the performance of M&A deals based on the economic profit model and comparing the results with ones obtained by means of traditional methods – accounting studies. Applying economic profit as an indicator of M&A performance allows us, in contrast to existing studies, to assess the impact of mergers and acquisitions on value of European companies in the long-run. Our study is based on the sample of 153 M&A deals initiated by companies from developed capital markets of Western Europe. Analyzing one of the latest periods, 2000-2011 years, we prove that the performance of combined firms improves subsequent to mergers and acquisitions. We find positive industry-adjusted differences between the post-acquisition and the pre-acquisition performance measures. The difference equals to significant 3.3% for EBITDA/Sales ratio and 3.1% for EBITDA/BVAssets ratio. The economic profit approach demonstrates similar results. Economic profit has increased due to M&A deals by $7.5 million. The obtained results indicate that companies in developed capital markets of Western Europe are able to achieve planned synergies and integrate successfully improving the operating performance and creating value of the combined firms. 

The article investigates corporate diversification through organic growth strategy and firm performance in developed and emerging capital markets. On the sample of 365 companies with 104 companies representing emerging capital markets and 261 companies from developed capital markets for the period of 2009-2012 we show that in emerging capital markets such diversification destroys value in the short-term period. As far as developed capital markets are concerned corporate diversification through organic growth creates value in the short-term and long-term run for moderate and high levels of diversification.

This article presents the results of a study of corporate capital structure in emerging capital markets, taking into account the business cycles of the economy. Our study was conducted on the data of 581 companies from BRICS countries for the years 2002-2014. We revealed that the target capital structure is dependent on set of factors which is the same for both periods of economic growth and recession. The speed of adjustment to the target capital structure is dependent upon the stage of the business cycle of the economy and is higher for in economic growth periods. The study also found out that the direction of the impact of the determinants of the speed of adjustment varies depending on the state of the economy (the deviation from the target capital structure leads to an increase in the speed of adjustment in periods of growth and a fall - in times of recession).

Corporate governance is one of the crucial characteristics of the firm, which provides not only investor’s protection, but also significantly affects all decisions taken by the firm, including financing policy. Results of studies on developed capital markets show that strong corporate governance provides more favorable terms of financing. In addition, on emerging markets due to information asymmetry, lower development of legal system and investors’ protection rights, corporate governance is also important as efficient way to resolve agency conflicts. The paper contributes to the literature by reviewing and analyzing research papers on the corporate governance mechanisms and financing policy. Results confirm that the corporate governance matter for debt-to-equity choice: firms with better corporate governance tend to have higher leverages. A high-level corporate governance also results in a greater speed of adjustment to target financial leverage as firms with strong corporate governance can access financing on more favorable terms

In this paper we study the influence of insider ownership on firm performance in emerging capital markets of BRIC countries in 2003–2013. We adjusted the classic model of firm performance proposed by Morck, Shleifer, and Vishny (1988) for the inefficient emerging capital markets. To modify the classic model we, first, apply the concept of investor protection rights developed by La Porta (2002) and, second, introduce additional factors controlling the growth rates and risk level. We test two specifications, linear and cubic, of the modified model for the sample of 97 nonfinancial companies in Brazil, Russia, India and China. The results demonstrate that the insider ownership increases the firm performance at low and high levels of insider ownership illustrating the “convergence of interests” hypothesis. When insiders own medium-size blocks of company’s shares (23,2–61,3%), the insider ownership decreases the corporate performance, thus illustrating the “entrenchment effect”. Finally, we demonstrate that the entrenchment effect became stronger in times of global financial crisis of 2008–2009.

Importance. M&A deals often have different effect on value of transacting companies. M&A announcements build value for special-purpose entities almost every time. They can bring the acquirers’ value up or down in line with certain factors. We investigate mergers and acquisitions assuming that they build value of acquirers, and focusing on how the stock market responds to M&A announcements. Objectives. The research evaluates how M&A in the financial sector influence value of acquirers. The research examines the efficiency of such deals initiated by the West European companies before and after the crisis period of 2000 through 2013. Methods. We examine how the stock market responds to M&A announcements, using the event study analysis. Based on linear regression, we identify key factors that impact on the efficiency of deals in the financial sector. The sample comprises 72 instances. Results. M&A have a negative impact on value of acquirers from developed economies as of the M&A announcement date. National focus of agreements and the size of acquirers positively correlate with cumulative abnormal return of acquirers from developed European economies. Conclusions and Relevance. The outcome should be prudently construed as the real return may not correlate with market expectations, though share prices reflect market expectations of the future cash flows. We conclude that consequences of M&A in banking are visible and static or invisible and dynamic. The latter ones include restructuring and changes in lending practices, which significantly impact on the return of a combined company. However, such consequences are difficult to forecast when M&A announcements just appear.

The research consists of defining the most suitable determinants of working capital for Russian companies and of testing these determinants on different life cycle stages that helps to optimize the working capital of companies, thereby improving their operational result. Research was conducted on Russian companies’ performance indicators of 2004-2013. Some determinants that appeared to be significant on developing markets, such as financial leverage, profitability, size and age of the organization were tested in the study.

The focus of this paper is the reasons of suboptimal investment policy that consists of over- or underinvestment. We consider the definitions of risk-shifting and risk avoidance effects that lead to suboptimal investments. These problems are connected with the agency conflicts in the firm between different parties: shareholders, debt holders and managers. Since the preferences of claimholders vary from one stage of the life-cycle to another, the incentives for over- and underinvestment differ in the stages of the life-cycle. The originality and the focus of this paper are the reasons for the exposure of overinvestment and underinvestment at different life-cycle stages. The research was conducted on a sample of Russian nonfinancial companies from the period 2003-2012. This sample was divided into three life-cycle stages: growth, maturity and decline. The method of life-cycle stages identification was modified in order to use only available data and make the model more business oriented. Risk-shifting and risk avoidance, as the reasons to the problem of suboptimal investment were studied. For this purpose the estimations with one of the effects were identified. The life-cycle stages, at which the effects took place, were determined, and also the strength of risk-shifting and risk avoidance was identified with the help of the regression analysis. In addition there was considered a way to mitigate these effects. According to the results they might be eliminated by the adjustment of short-term debt level.

This work contributes to the literature on exchange-rate exposure in emerging markets. We studied datasets of exchange-listed companies from four BRIC countries and discovered that exchange rate movements in the US dollar and euro affected more than 10% of these firms between 2003 and 2013. The most interesting finding of this research is that stock returns behaved differently with increasing and decreasing currency rates. For capturing the asymmetric relationship of stock and exchange rate movements, we applied a nonlinear dynamic model, which significantly improved our results compared to the empirical findings of simple versions of the Adler Dumas (1984) and Jorion (1990) models. We studied determinants of exposure to positive and negative currency movements separately. Although significant determinants in both cases were mostly similar, their weights were different. For example, the ratio of export sales was asymmetrically correlated to exchange rate exposures for all countries except Russia. For a better understanding of the sources of asymmetry in exchange rate exposure, we separately studied the positive and negative coefficients of currency exposure from the non-asymmetric model. This was never done before and natural in a way that determinants should affect positive and negative currency exposures differently. We found evidence of the contrasting impact of export sales and foreign debt in both cases.

The topic devoted to cross-border M&A performance has received wide attention in academic literature. Most existing studies examine wealth effects of international M&As in developed countries. We contribute to existing research by examining the market reaction to the announcements of M&As initiated by companies from BRICS countries over 2000–2012. We assess the long-term performance of M&A deals along with the short-term one and provide a copmarative analysis of company wealth gains in cross-border and domestic M&As. Based on the sample of 117 cross-border deals and 247 domestic M&As we find that foreign acquisitions outperform the domestic ones in the long run. We also find that main determinants of M&A performance are the acquirer’s FCFF, percentage change in the acquiring country’s exchange rate against the target country currency during the acquisition year, and the level of international diversification of acquirers.

This research focuses on the relationship between corporate governance and performance in the largest European listed banks, which have been studied to a lesser extent within this field. The study is based on agency theory and we use a sample of 404 observations referring to 97 banks selected from the annual ranking of the 2,000 biggest companies in the world prepared by Forbes. The paper covers the period from 2006 to 2010, thus, examining the changes in the performance drivers in the recent financial crisis. On the basis of the panel data analysis, we confirm that the variety of governance factors including board size, insider appointed, directors’ age, board meetings and affiliated committees influence the performance of the banks. This paper contributes to a better understanding of the effect of corporate governance on the financial performance of the financial companies in times of high capital market volatility.

In this research the analysis of the impact of corporate financial architecture on company’s performance is conducted for a sample of large Russian companies. We focus on sustainable growth identified  thru the application of intrinsic value change criteria.  We employ integrated approach to understand the determinants of the sustainable growth based on key structural characteristics of a company. The financial architecture is represented by ownership structure (managerial ownership, foreign ownership and ownership concentration), corporate governance (the structure of the board of directors and internal control) and capital structure. We examine the difference in characteristics of growth sustainability of Russian companies representing three different types of financial architecture of more than 50 large Russian firms. Our results indicate that corporate financial architecture has a significant impact on the sustainable corporate growth in the Russian market. More importantly, we show that the nature of the influence depends on the type of financial architecture.

Corporate governance is one of the crucial characteristics of the firm, which not only provides protection for investors but also significantly affects all decisions taken by the firm, including financing policy. The results of studies examining developed capital markets show that strong corporate governance provides more favourable terms of financing. In addition, due to information asymmetry, as well as lower development of legal systems and investor protections in emerging markets, corporate governance is also important as an efficient way to resolve various types of agency conflicts, thereby reducing agency costs that significantly decrease corporate value. In accordance with theory and empirical findings, corporate governance also influences the speed of adjustment to the target leverage. Our paper contributes to the literature by analysing the corporate governance mechanisms and financing policy using the data of emerging markets companies. The sample consists of public companies from BRIC during the 2005-2012 financial years. Our major results confirm that corporate governance matters for debt-to-equity choice: firms with better corporate governance tend to have higher leverage, as proper corporate governance helps to resolve different agency conflicts. High-level corporate governance also results in a greater speed of adjustment to target financial leverage, as firms with strong corporate governance can access financing on more favourable terms. 

Currently, the venture capital becomes more and more advanced and effective source of the innovation project financing, connected with a high risk level. In the developed countries it plays a key role in transforming innovation projects into successful businesses and creating prosperity of the modern economy. Actually in Russia there are many necessary preconditions for creation of the effective venture investment system: the network of the public institutes for innovation financing operates, there is a significant number of the small and medium-sized enterprises, capable to sell production with good market potential. However the current system does not confirm the necessary level of efficiency in practice that can be substantially explained by the absence of the accurate plan of action to form the national venture model and by the lack of experience of successful venture deals with profitable exits in Russian economy. This paper studies the influence of various factors on the venture industry development by the example of the IT-sector in Russia. The choice of the sector is based on the fact, that this segment is the main driver of the venture capital market growth in Russia, and the necessary set of data exists. The size of investment of the second round is used as the dependent variable. To analyze the influence of the previous round such determinant as the volume of the previous (first) round investments is used. There is also used a dummy variable in regression to examine that the participation of an investor with high reputation and experience in the previous round can influence the size of the next investment round. The regression analysis of short-term interrelations between studied variables reveals prevailing influence of the volume of the first round investments on the venture investments volume of the second round. As a result of the research, the participation of investors with first-class reputation has a small impact on an indicator of the value of investment of the second round. The expected positive dependence of the second round investments on the forecasted market growth rate at the moment of the deal is also rejected. So, the most important determinant of the value of the second-round investment is the value of first–round investment, so it means that the most competitive on the Russian market are the startup teams which can attract more money on the start, and the target market growth is not the factor of crucial importance.

This article provides an analysis of the impact of the funding policy for the investments of the company using a method that takes into account the problem of èndogennosti of the studied parameters, analyzed and evaluated factors influencing the key aspects of the funding policy. The comparative analysis of existing methodologies link corporate policies and investments.

This paper contributes to understanding the relationship between insider ownership and investment performance in emerging markets measured by marginal Tobin’s Q. We will attempt to separate the positive wealth effect of managerial ownership from the negative entrenchment effect. The research analyses other determinants of corporate investment performance: institutional ownership, firm size and R&D intensity. The study was conducted on the sample of companies of Brazil, Russia, India and South Africa over 4-year period, 2009-2012.

The article is defined the relationship between cash flow and investments in companies. An algorithm was built which determined the dependence of company's investment activity from the determinants of financial constraints. The methodology was tested on data from companies in developed and emerging markets. The comparative analysis of the factors was realized which gives understanding that phenomenon of limiting depends from the type of market and will develop ways to improve investment policy of firms in developing economies.

Shareholder conflict may significantly impact market capitalization of a firm because of rising risk of additional reputational costs. In this paper we analyze changes in value of Russina telecommunication company Vimpelcom after mass media announcements about developments in lawsuits between major shareholders in 2005-2013. We suggest methodology of prediction of market reaction. All announcements are classified according to several characteristics. Calculation of abnormal return allowed us to estimate cumulative losses of shareholders of Vimpelcom due to the conflict between Altimo and Telenor.

We introduce a new asset pricing model to account for risk asymmetrically in a very natural way. Assuming asymmetric investor behavior we develop a utility function similar to a quadratic utility but include a colog measure for capturing risk attitude. Asymmetry in investor preferences follows the asymmetric relationships between asset and market returns in equilibrium. Moreover the local version of the model depends on the characteristics of domestic markets, which is reflected in the different relationship between asset and market returns. We test the model in the Russian and South African markets and show that market premium in the Russian market is higher than in the South African market. 

Researchers have long tried to define the impact of corporate mergers and acquisitions on company performance. We contribute to the existing literature by examining the influence of M&A deals on company value in the short-run using the event study method and in the long-run based on economic profit concept. Examining a sample of 80 deals initiated by companies from emerging capital markets over 2002-2009, we find that M&As are value-destroying deals for the combined firms. Results from the long-run analysis prove the negative industry-adjusted differences between post-acquisition and pre-acquisition performance measures. The difference is equal to a significant -3.3% for the EBITDA/Sales ratio. The Economic Profit approach demonstrates a similar result. Our findings from the short-run analysis indicate that the announcements of M&A deals generate significant high returns for target shareholders, while the returns to bidder shareholders are not significant. We also analyze the determinants of M&A performance, such as method of payment, business similarity, and the target’s country. 

The debt-to-equity choice has always been one of the crucial decisions of the firm’s management. The capital structure is vital for the appropriate development of relationships among the company’s stakeholders. The conflicts of interests between management and shareholders and creditors as well as conflicts between other groups of stakeholders lead to the appearance of agency costs that decrease the corporate value. The role of agency costs is even higher in emerging markets due to higher information asymmetry, lower development of legal system, investors’ protection rights and corporate governance. Our paper contributes to the literature by analyzing the agency costs and capital structure choice on the data of emerging markets companies. Our sample consists of more than 150 companies from BRICS and Eastern Europe within 2000-2010. By conducting the empirical analysis based on both linear panel data regressions as well as simultaneous modeling of leverage choice and management shareholding we obtain the following results. The agency costs are relevant for debt-to-equity choice in Russia, India, China and Eastern Europe but the results are not so obvious in Brazil where financing policy could be explained by trade-off theory. We found out the non-linear relationship between financial leverage and management shareholding which is also in line with agency costs significance. Moreover we revealed that agency costs define long-term leverage, but cannot explain short-term debt in emerging markets. Further, we concluded that debt ratios based on market value of equity are not affected by agency costs opposite to capital structure variables based on book value of equity.

The last market crash of 2008-2009 showed that the construction sphere is one of the most fragile spheres to the crisis effect. The destructive effect of this crash was resulted in substantial decrease in mortgage lending, price index, capital investment, and in growth of the cost level. As the construction industry remains strategically important, the eruption of this sphere, which was facilitated by the crisis, might considerably harm Russian economy as a whole. However, lack of relevant studies leaves the main risk factor of Russian construction firms’ failure unexplored. The purpose of this study is to reveal the key determinants, which cause bankruptcy of Russian construction firms during the crisis period. Moreover, the article provides testing of applicability of accounting-based models to prediction of bankruptcy of these firms. The results show the validity of binary-choice logit and probit specifications with the highest classification accuracy of around 85%. In addition, the liquidity and profitability ratios were defined as superior insolvency factors for four years before a company files for bankruptcy.

The problem of the firm bankruptcy prediction was investigated by foreign researchers in the 1930s and it still remains relevant. Since the publishing of Altman’s (1968) major work, based on multiple discriminant analysis (MDA), this methodological area has considerably changed. Taking into consideration that new data have appeared in the course of time, companies’ average size has changed, and the accounting standards have changed (Altman, Haldeman, & Narayanan, 1977), methods and models should be renewed so as to be appropriate for current situation. The purpose of this paper is to reveal factors causing bankruptcy and use models appropriate for prediction bankruptcy in the area of a construction industry during the financial crisis. This investigation has been carried out on the basis of logit and probit analysis. The main reasons of bankruptcy revealed in the course of this investigation are the following: (1) non-optimal capital structure formation; (2) ineffective liquidity management; (3) decrease in assets profitability; and (4) decrease in short-term assets turnover. The most reliable indicators which give warning of bankruptcy ahead of others are financial instability and liquidity ratios.

During the last two decades corporate international diversification became a widely used growth strategy. However, the majority of scientific researches insist on its value-destroying pattern. Those of them which were based on accounting studies’ methodology and used current performance measures are likely to make an incomplete evaluation of corporate performance by accounting either for operating performance or financial (cost of capital) effects of internationalization. The current paper proposes a new approach for estimation of internalization-performance relationship which is based on economic profit concept. It allows to control simultaneously both operating and financial effects of internationalization on the firms’ current performance. The proposed model has been empirically tested on a sample of large companies from one of emerging economies - Russia. The results identify a non-linear U-shape relationship between a degree of internationalization and companies’ residual income (economic profit). The relationship is mainly determined by operating performance effects on economic profit while cost of capital has a modest effect. Overall for the majority of companies international diversification refers to decrease in economic profit. The results are compared against the Q-Tobin measure which incorporates expectations about future performance. A joint analysis of current performance (economic profit) and long-term performance (Q-Tobin) allows to expect the internationalization benefits to be realized in future. As an implication of the present research for corporate decision makers it may be stated that at the initial level of international diversification the internationalization decisions should be made with a high degree of caution. There should be a clear internationalization strategy based on definite mechanisms of performance improvement. The prestige and other irrational motives which may lead to the value destruction should be pruned.

This paper presents an analysis of innovative growth of the economy in terms of increase in production of natural resources held within the framework of the model. The aim is to study the problem questions commodity-oriented economy based on building models of endogenous growth. The models are built in the framework of the theory of endogenous growth and are a multi-sector extension of the Solow model with a constant rate of savings. In the proposed model to the economy added resource sector by developing its different from other companies, changes and non-tradable goods sector.

This paper presents an analysis of innovative growth of the economy in terms of increase in production of natural resources held within the framework of the model. The aim is to study the problem questions commodity-oriented economy based on building models of endogenous growth. The models are built in the framework of the theory of endogenous growth and are a multi-sector extension of the Solow model with a constant rate of savings. In the proposed model to the economy added resource sector by developing its different from other companies, changes and non-tradable goods sector.

A large number of research papers on relation between currency risk and firms’ value have  been published during last several decades. Researches acknowledged that currency risk could be a  pricing factor. We follow models’ developments under the framework of asset pricing theory and  come to a conclusion that dynamic and asymmetric international asset pricing models were  considered among the best for capturing exposure to exchange rate risk in developed and emerging  markets.  Exchange rate exposure became a separate topic of research. Different determinants  of exposure were discovered in the literature. Economists estimated their influence on sensitivity of  stock returns to currency volatility.  There is certain specific in currency exposure research. In this paper we considered  different methodological aspects of exchange rate exposure modelling and mentioned details  of empirical analysis in emerging markets.   

The performance of M&A deals in financial sector is the actual topic in financial academic literature for many years. Most existing studies examine the performance of M&A deals in developed countries. We contribute to existing literature by examining the impact of mergers and acquisitions on bidder’s value in emerging BRICS countries over 2000–2012. In contrast to existing studies we analyse the latest period and examine the impact of the economic crisis of 2008-2009 on the performance of M&A. Based on the sample of 264 deals we find that mergers and acquisitions create shareholder’s value. We also find that the main determinants of M&A performance are method of payment, deal size, number of previous acquisitions made by the acquirer prior to the current transaction, acquirer’s intellectual capital and the difference in countries development.  

 

This study is focused on the use market expectations in firm’s management. According to the results of previous researches performed on developed markets, expectations management is an efficient corporate  tool which allows managers to influence company’s value. The literature on expectations management in the emerging capital markets almost does not exist.  We contributed to the literature by examining emerging capital market and the paper is claimed to be the first empirical investigation on Russian market concerning the topic considered. We prove the existence of expectations management on Russian capital market. In order to find an answer Russian companies in the period from 2005 to 2012 have been analyzed. We performed three types  of analysis: graphical analysis, contingency analysis and tests of the rationality of market expectations. As a result of this investigation we found that the executives of Russian firms use market expectations management. Moreover, we show that this instrument is mostly applied after the financial crisis of 2008.

The paper presents the results of dynamic trade-off empirical testing on the data of 30 countries for 2005-2010.  The authors show that the speed of adjustment to the target capital structure for Western Europe countries is mostly determined by internal factors. Meanwhile for emerging capital market the growth rate of GDP as well as time dummy variables are crucial determinants of speed of adjustment. Institutional factors such as credit and bankruptcy institutions developments revealed nonlinear relationship with the speed of adjustment. Moreover, investor protection developmens is also a significant determinant that exhibits positive relationship for both developed and emerging markets.

There are a lot of models of bankruptcies prediction, which differ in methods of modeling and in set of factors. These methods are mainly belong to 5 groups: the classic statistical methods, regression analysis, the method of discriminant analysis, logit-analysis methods, methods of fuzzy sets and neural network methods. Combinations of these methods also can take place. The last three groups of methods are currently being developed especially quickly. As for the choice of factors bankruptcy, prevails heuristics. There is no formal methodology for selection and comparison groups of economic indicators to build the model of bankruptcies, as well as effective methods for data preprocessing. In this paper we propose an original method for the choice of indicators, followed by the construction of neural network model diagnostic of bankruptcies based on Bayesian approach.

This article presents the results of our recent study of the relationship between the corporate financial architecture and strategic performance of Russian companies measured by Tobin's Q coefficient. We determine a stage of the company’s life cycle by comparing the revenue growth rates for two consecutive periods and the industry average growth rates for those periods. The study analyses three stages of the company 's life cycle: the stage of rapid growth, maturity stage and the stage of the recession. The earlier stages of the life cycle are not considered due to the nature of the sample, which includes only the largest Russian public company. Results demonstrate that there are significant differences in the impact of the ownership structure, capital structure and the board characteristics on the company's performance depending on the stage of the life cycle, which proves the need to take into account the life cycle issues when developing company’s strategy and managing the firm.

The subject of this investigation is transparency and its impact on Russian companies’ performance. On the one hand, it is considered that high level of transparency reduces informational asymmetry, mitigates agency problem and adverse selection, and helps financial market to function efficiently. But Russia is a developing country with high level of corruption ( 154place in Corruption Perceptions Index 2010)and weak property rights protection. So it is costly to firms to have high level of disclosure quality because there is considerable probability of state interference in business in Russia. Thereby high level of disclosure is a trade-off between the benefits from investors’ confidence and the costs of potential expropriation by predatory government. The article considers review of transparency investigations, its impact on company performance depending on internal and external conditions, different ways to estimate transparency, it contains the results of panel regression analysis of transparency in Russia on the period 2009–2011. The investigation includes 129 largest Russian companies.

Comparative valuation is based on the market prices of similar companies and actually obtained financial results. Despite the fact that the method represents an approach which  is quite easy to implement compared to the income approach, there are still some issues to be kept in mind regarding applicability of a set of multiples, accuracy of valuation, inter-country features and adjustments to be made.

An essential step in a correct and precise process of company’s valuation from both the theoretical and practical points of view is making an adequate decision about methodology choice on the basis of allowances for company’s features, market environment and economic situation. Comparative valuation is based on an analysis of several peer companies           which implies existence of a mature liquid market with a bunch of players giving wide scope for determining potential analogues. Even partial violation of the basic assumption leads to a forthcoming of obstacles in using the method without detailed and complicated analysis.

It is not only the problem of choosing the right approach to a group of multiples’ definition to be faced, but also an issue of the right use of multiples: there is a group of potential factors which can affect the specifics of multiples for companies operating on the different markets. This raises the question about the need of adjusting financial variables for different countries as there are no absolutely identical markets and, thus, close analogues. Moreover, deep understanding of determinants and drivers of multiples enables researchers to evaluate a company in a more precise way through the choice of the most applicable similar firms. It is also worth mentioning that a process of valuation includes not only a company’s valuation but also a valuation quality control for further minimizing an error.

The practical complexity of comparative valuation application generates a bunch of methods and methodologies that can be implemented. This paper is dedicated to recent studies of comparative valuation through different elements of the theoretical framework including company features, market environment and country specifics.

The article proposes a model for identification the stages of the life cycle of companies, the same to the problems of under- and overinvestment, which were tested on the sample of Russian companies. The author made a research of capital structure on the each stage of the life cycle of organization, and investment activity of Russian companies was analyzed in terms of under- and overinvestment.

The variance and semivariance are traditional measures of asset returns volatility since Markowitz proposed the market portfolio theory. Well known models for expected asset returns were developed under assumptions of mean-variance or mean-semivariance investor’s behavior. But numerous papers provided arguments against these models because of unrealistic assumptions and controversial empiric evidence. More complicated models with downside risk measures experienced difficulties with applications. The new model based on the special form of the investor’s utility function is proposed in this paper.

The choice of appropriate model for estimation of cost of equity in emerging markets is still a very challenging problem. Market inefficiency, limited opportunities for diversification, as well as liquidity issues inspire researches to look for risk characteristics beyond the usual mean variance framework of the classical capital asset pricing model. Various models were developed for the past several decades proposing new ways of risk assessment, however, controversial empirical evidence of these models requires careful consideration. We tested empirically how different risk parameters, including those entropy based, explain the rate of return on Russian equities. We compare different models to choose the best suiting one for each period of economic cycle.

The paper discusses corporate performance modeling through the integrated conception of corporate financial architecture. We examine the influence of financial architecture based on ownership structure, capital structure and corporate governance over strategic performance of Russian nonfinancial companies. First, we conduct a comparative analysis of different measures for corporate performance using economic profit and Tobin’s Q as dependent variables. Second, we test our model using the unique research database of 70 Russian companies that allowed us to test different dimensions of corporate governance quality and to demonstrate the high correlation between the quality of corporate governance and Russian companies’ performance. Third, we contribute to the challenging issue of exploring the relationship between boards and corporate performance before the global crisis and within the crisis. We contribute to the literature by applying new approach derived from corporate financial architecture concept to economic profit modeling in an emerging market.

In this paper we study the performance effects of capital structure, ownership structure and corporate governance mechanisms of Russian companies. To address the lack of research in corporate performance modeling in emerging markets we contribute to the literature by introducing cluster analysis of financial architecture and market performance of Russian companies. Our idea is to find out the efficient and inefficient types of financial architecture in emerging markets. On the sample of 50+ largest Russian nonfinancial companies within the period of 2005-2010 years we demonstrate existence of three sustainable types of financial architecture in Russia. Using cluster analysis we form the cluster of companies in pre-crisis period and then demonstrate the relationship between the financial architecture type and level of market performance of the company.

The problem of the firm bankruptcy prediction was investigated by foreign researchers in the 1930s and it still remains relevant. Since publishing of the major Altman’s work (1968), based on multiple discriminant analysis, this methodological area has been considerably changed. Taking into consideration that new data have appeared in the course of time, companies’ average size has changed and the accounting standards have been changed (Altman (1977)) methods and models should be renewed to be appropriate for the present day situation. The purpose of this investigation is the revealing of factors causing bankruptcy and using models appropriate for prediction bankruptcy in the area of a construction industry during financial crisis. This investigation has been carried out on the basis of logit and probit analysis. The main reasons of bankruptcy revealed in the course of this investigation are the following: • non-optimal capital structure formation • ineffective liquidity management • decrease in assets profitability • decrease in short-term assets turnover The most reliable indicators, which give warning of bankruptcy ahead of others are financial instability and liquidity ratios.

After the financial crisis, the necessity to support large inefficient banks had a crucial impact on a number of economies in Europe.  This paper focuses on  the  effect  that  corporate governance mechanisms  has on performance  for commercial banks operating in developed and emerging European markets. We test a model of market-based bank performance  for a sample of 150 commercial banks from 27 European countries over  a  period  from 2004 to 2011. As a result, we  show that  such governance mechanisms  as ownership concentration, state ownership,  board independence,  and others  do  have a significant influence on bank performance.  We also find significant differences between models for developed and emerging markets, as well as for different geographical regions. Studying the financial crisis provides us with evidence  for  structural movements in the  relationship  model  between corporate governance and bank performance as a result of the 2008-2009 crisis. In general, the important determinants lose  their significance after 2007.  Though,  due to the possible endogeneity problem in our models, we should be cautious when interpreting the causality of connections between factors.  

The development of information technologies, increase of the knowledge significance, the vital importance of innovation as the tool to obtain the competitive advantage issue new and complex challenges to modern companies in many aspects of their business. One of such issues is the adequate information disclosure about the intellectual capital of the company to satisfy the inside and outside stakeholders, such as: management of the company,employees, investors, government, credit institutions and many others. It is necessary to note that information disclosure is particularly relevant to companies in emerging markets due to their inefficiency, which often leads to inadequate assessment by stakeholders. This paper presents the non-financial evaluation of the intellectual capital disclosure by the cumulative method (intellectual capital disclosure index). This index is used as the fundamentally different analytical tool to investigate the information disclosure of intellectual capital by the means of empirical panel data analysis, in order to evaluate the systematical contribution of intellectual capital into value creation of the companies of the largest developing countries. The paper is organized as follows: in the first part it provides a brief academic overview of the definitions and classifications of intellectual capital, methods of evaluation. The intellectual capital impact on the value of companies is also briefly discussed in this part of the paper. The index regression model of the impact of intellectual capital disclosure on the value is discussed in the second part of the paper. Finally, main results and conclusions of the research and recommendations for further development of the topic are presented. The study describes the disclosure of information on intellectual capital of the companies in emerging markets (Brazil, Russia, China, South Africa), the main finding is that the disclosure of such information contributes to the growth of the value of the company, because it allows stakeholders to evaluate it adequately.

This paper examines the impact of mergers and acquisitions on corporate performance on the sample of companies from BRIC countries over 2005-2009. Based on the accounting study method we find that the operating performance of firms (measured by EBITDA/Sales ratio) improves subsequent to mergers and acquisitions. We also find that the main determinants of M&A performance for the companies from BRIC countries are the acquirer’s size and friendly character of the deal.

The impact of mergers and acquisitions on company value is the topic for debate in financial academic literature for a long time. One of the major considerations in any M&A transaction that influence the performance of mergers and acquisitions is the method of payment. Based on the sample of 825 deals in BRICS countries that occur between 1999-2009 we find that motives underlying the method of payment in M&A deals are: acquirer’s cash availability, deal size, the percentage ownership of institutional shareholders in bidder’s equity, the dynamic of bidder’s market to book ratio, the acquired and already owned share of target company at the announcement date.

This paper presents the  original model  for integrated value based management derived from  the principle of value creation for both - strategic financial and nonfinancial stakeholders.We show that stakeholder value creation assumes positive economic profit stream for non-financial stakeholders.The model requires the integration of management and corporate governance levels. The former is consistent with the proposed stakeholder value based management model (STVM), the latter is described by proposed new governance model, namely stakeholder’s value based corporate governance (STVG). The third component of integrated model is related to the strategic value reporting.

The article develops the original methodology for corporate growth analysis by means of author’s sustainable growth indices derived from the economic profit criteria. We use the sample of the firms from different industries in 14 emerging capital markets. We show that sustainable growth indices have high explanatory power for understanding total shareholder returns and for forecasting its long run trends.

Capital Structure policy still puzzles researchers in developed and emerging markets. We contribute to the literature by examining capital structure policy of large companies in Central Europe and BRIC countries.

Our sample consists of 372 firms from 14 Central and Eastern European and BRIC countries for the period 2002-2009. We conduct separate analysis for both pre-crisis and post-credit crunch periods to emphasize the differences occurred in debt-to-equity choice policy in emerging policy.

Our research rests upon the dynamic trade-off model. According to the concept each company has its own target financial leverage to which it is trying to adjust is actual debt-to-equity ratio with a specific adjustment speed. This rate of adjustment depends on firm-specific, institutional and macroeconomic factors. Moreover the dynamics of a firm’s leverage could depend upon financial deficit of the firm and the cost of available financial sources. The former issue addresses the situation when the choice of financing mix should be made under the existence of information asymmetry, unclear ownership structure and positive transaction costs which could lead to the financing sources hierarchy formation. The latter topic relates to the concept stating that the management would try to take any opportunity of favorable market conditions to reduce the costs of financing.

Our model is designed to test the following hypotheses:

Hypothesis 1. Firms operating in BRIC and Eastern Europe have target financial leverages and positive speed of adjustment. The major determinants of target ratio in these countries are the traditional determinants derived for the developed markets (size, assets profitability, growth opportunities, tangibility of assets). 

Hypothesis 2. Existence of internal financial deficit ceases the significance of target financial leverage by decreasing the speed of adjustment.

Hypothesis 3. Market estimates of company’s value and lending rates influence the dynamics of capital structure and lead to the decrease of the target adjustment role (by decreasing the speed of adjustment)

Hypothesis 4. Credit market development and liquidity problems within the credit crunch period cease the role of target adjustment by decreasing the speed of adjustment.

Hypothesis 5. The speed of adjustment in BRIC and Eastern European companies positively depends on the following macroeconomic factors: inflation rate, the growth rate of the economy, the degree of financial market development. 

The results of our research show that the speed of adjustment of capital structure to the target level in BRIC and Central and Eastern European countries has reached the level of that of the developed countries. Further, this speed is time-varying, has a cross-firm variation and depends on macroeconomic factors, internal financing deficit and, less significantly, cost of financing.

The proposed decomposition of financial deficit revealed that the major role plays two elements: profit (through profitability) and capital expenditures. Operating cash flow significant grows within the credit crunch period emphasizing the crucial role of liquidity during the unstable period. Moreover the speed of adjustment is lower for the whole sample if compared to the pre-crisis period results. 

Market timing factors are significant for Central and Eastern European companies only, where a negative relationship of leverage and cost of debt was revealed. However the changes of market prices cannot explain the capital structure choice in our sample.

Macroeconomic variables (inflation, GDP per capita growth, financial market development) positively influence the speed of adjustment. Thus firms operating in BRIC and Central and Eastern Europe tend to adjust their capital structures to the target levels within the periods of economic growth, high inflation and in the systems with more developed financial markets.

This paper has examined how financial performance, ownership structure, corporate governance and macroeconomic factors affect the strategic performance of 40 public banks in Russia, Kazakhstan, Ukraine over the period from 2005 to 2010. To account for the impacts of the recent financial crisis, we separately considered the years before and during the crisis, namely the period up to 2008, and the crisis years from 2008 to 2010. We verified the integrated model of bank performance using an empirical analysis of panel data. Strategic performance of banks is measured with Economic Value Added (EVA). Our results show that strategic performance is, for the most part, explained by three factors: bank size, the growth of net interest income and state ownership for both periods. One of the key findings of the paper is that there exist differences in set of factors of the strategic performance in the pre-crisis period and in the crisis years. We demonstrated that corporate governance factors have a statistically significant effect on bank performance before the crisis. Our results provide that in the time of the crisis financial measures are more significant determinants of strategic performance.

The paper presents the results of dynamic trade-off empirical testing on the data of BRIC and Eastern European companies. On the sample of 403 large public companies within 2002-2010 financial years the relevance of dynamic trade-off theory was revealed. Moreover it was found out that market timing and pecking order motives influence the debt-to-equity choice through its effect on speed of adjustment while agency and behavioral factors are significant in target debt level specification.

Regarding today’s unstable economic situation the issue of  correctly evaluation of existing financial statements of the company and forecasting it`s development potential is very important both for the company and for the rest of the market players. Within the framework of this research the evaluation of the bankruptcy probability of the company in the oil and gas sector has been considered. For now oil&gas sector remains the most stable and conservative due to the specific end products produced and business organization model. In the meantime there are some relatively small (comparing to the transcontinental companies) oil&gas companies, which business is not under governmental insurance or under the shelter of the host company. For such companies, sustaining financial stability is a real challenge. That is why economic shocks often conduce their bankruptcy.

The determinants of the bankruptcy probability in this research were the following financial data: profitability, liquidity, financial leverage, turnover ratio. Theoretical analysis has proven that financial leverage correlates with the other model data (marketability, liquidity and the turnover ratio). This issue has been proved through data output. The highest was correlation between financial leverage and liquidity (34%). Changing this variable to its own deviation from the industry mean (taking absolute value) the problem of multicollinearity has been solved. However, according to the model results, this variable only slightly affects the bankruptcy probability. Over all profitability has the most magnitude, which corresponds the other researcher’s conclusion: stable company can be characterized through high liquidity, high profitability and low financial leverage deviation from its standard. So that the empirical analysis has shown, that test hypothesizes can be executed on the principal variables (profitability, liquidity and financial leverage). Such variable as rate of income tax indicates the social-economic development of the country, in which the company operates, than a factor of bankruptcy.

Performance of the firm depends on its structural dimensions: capital structure, ownership structure and corporate governance. Their interactions are known as corporate financial architecture according to S. Myers. In this paper we analyze financial architecture which is a mix of ownership structure, capital structure, control and board’s composition, and therefore, provides the given framework for improving corporate performance. We contribute to the literature by different attributes of our study. In contrast to most empirical papers on performance, we develop integrated rather than segmented approach combining the intrinsic components of corporate financial design in one research model. We introduce new variable to capture the structure of ownership for the purpose of performance analysis. Our third contribution is based on comparative analysis of the influence of financial architecture over corporate performance in rather different capital market environment: developed European and emerging (developing) capital market’s countries. We start with a classic empirical model of the impact of ownership structure, capital structure and other components of financial architecture on the corporate performance. Further we verify the validity of exogenous nature of key variables of the classic model when applying it to companies in developed and emerging market environment. Our results could have some important policy implications for the firms in normal economic environment as well as in the period of global economic crisis. We found that the higher proportion of related ownership which indicates investors with significant voting power and the board’s composition affect firm performance positively. The related shareholders and independent directors seem to add more value to firms while the impact of government ownership differs depending on the country. The emerging market’s sample versus the one from developed countries proves the stronger influence of corporate financial architecture over performance.

Hi-tech innovative alliances tend to have more key sustainable competitive advantages in comparison with those out of alliance, especially because alliances allow the companies to switch through the partners the financial burdens and intellectual investments in innovations. BRIC make an important input into Gross World Production and its hi-tech industries grow faster than others over developing countries. However companies of these industries still lack internal resources of innovative and technological facilities, e.g. Russian companies, because of that alliances (usually, international anв transnational) acquire more and more popularity. Alliances give the access towards resources and competences of the direct and indirect partners. The paper describes the empirical evidence of alliances efficiency factors and its influence on the high-tech companies of India and China. This evidence can be replicable to some extent and useful to the development of Russian companies. According to the testing results it is possible to assume, that efficiency of alliances has the significant impact on the corporate value in the mid-term. The crisis has significant impact on the observable dependencies.

An article represents a comprehensive overview of approaches to capital structure modeling on the example of the public corporation Silvinit. At first, there are provided a short review of the company and of the corresponding industry followed by the description of how the analogues for the company were chosen. The next part of the article gives a step-by-step description of the practical implementation of such models as WACC model, EBIT-EPS, method of operational profit. Monte-Carlo approach is used for demonstrating an influence of the leverage increase on tax and interest payments as well as company's default risk. In conclusion the authors compare the results of different approaches with the current capital structure of Silvinit.

The paper presents the results of empirical testing of behavioral capital structure concepts relevance for leverage choice made by Russian companies. Conducted on the sample of 50 large public companies the analysis revealed the insignificance of market timing theory. However the results show that information cascades and management overconfidence and optimism can partly explain the debt-to-equity choice of Russian companies.

This paper introduces the original author's concept of harmonized firm based on stakeholder approach. We show that creation of new capital structure based on the mix of financial and nonfinancial capital which we call capital architecture becomes one of the main characteristics of such a firm. We argue that capital architecture requires new value creation mindset based on stakeholder value added for strategic nonfinancial stakeholders as well new tools for financial analysis.

The Lintner's model is one of classical model for analysis of didivend policy. In the paper the model was estimated for 4 the most growing country: Brazil, Russia, India, China. The results were compared with the estimation of Lintner's model for the USA. One of main results of work that dividends policy in emerging country has similar tendencies (high the speed of adjustment coefficient,low target payout ratio), but differ from its in developed market the USA.

In this paper the authors review the working papers presented in 2011 at international conferences and workshops on corporate governance in Europe. The focus was made on the trends on corporate governance development in emerging markets and its influence over corporate performance. Besides, authors analyze the theoretical approaches to corporate governance that provoked a lot of discussion in 2011.

In this paper we investigate the influence of corporate governance over operational efficiency of Russian companies. We measure efficiency with frontier efficiency methods (DEA and SFA). Corporate governance quality is introduced into the model using the original corporate governance index that is calculated based on methodology proposed in the paper. Using the sample of 54 largest Russian companies we test the model of frontier efficiency and demonstrate the high level of significance of corporate governance index.

The level of corporate diversification is one of the most important decisions that management makes. The diversification strategy has its benefits and costs. According to the principles of corporate finance the efficiency of diversification strategy is always assessed by its impact on shareholder value. The article discusses the main value-creating and value-destroying drivers of diversified firms. 

Current article is dedicated to the relationship between effectiveness of usage of intellectual capital and capital structure of firms in Russia in 2005-2007. Current research showed that effectiveness of usage of intellectual capital of firms has a positive influence over the level of financial leverage. The result of the research has showed that the more effective usage of intellectual capital makes a company more attractive for the credit organizations and opens more sources to obtain financing. There were also revealed some specific features of relationship between the effectiveness of utilization of intellectual capital and corporate financial decisions in Russia. The result is consistent with the results from the similar researches from the developed markets.

 

 

 

The variety of research papers on economic profit explanatory power in corporate market value changes exists with the data from developed as well as emerging capital markets. Existing empirical papers are classified to analyze the trade-offs in research methods.

 

KPMG is the international chain of advisory, tax and audit service companies. In June, 2010 it conducted an open conference devoted to the economic value added, its principles and methodology. The conference became a significant event for Russian business and discovered common acceptance for necessity of new and up to date concepts of management. Two leaders of Stern Stewart & Co, the first rate consulting company, were invited especially for the event. Appearance of Joel Stern, founder of the Company, became unprecedented occurrence for such meetings in Russia. Stern Stewart & Co (www.sternstewart.com ) is a leading strategic consultancy and value management company. It was founded in 1982, New York, and became a pioneer in the business economics and applied corporate finance. In the late eighties the company invented and took out a patent the concept of management based on economic value added (EVA®), which today presents one of the most developed and popular concepts in real business. Stern Stewart & Co is based in many countries in the North America, Europe, Latin America, Australia, China, India, SAR and in the others. Russia is virtually a single country where analysis based on the value and consultancy services applying value based management are almost not presented. Joel Stern, the founder of EVA® concept, presented the main report devoted to the company's system of management. Due to the KPMG request Corporate finance center of SU-HSE (www.cfcenter.ru ) and Performance and Technology KPMG in the May-June 2010 conducted joint investigation devoted to the Russian companies' practices of management and analysis of factors of their value. The results of the investigation were also presented on the conference.

Capital structure choice is among the key corporate decisions which influence its long term performance and it is considered to be one of the core problems in th theory of corporate finance. Despite the existence of plenty of empirical research papers in the area, many conceptual problems have not been resolved even for developed economies. The existing research on emerging markets covers only few countries within this group and does not provide empirical results for all classical capital structure concepts. The main research question of this paper is to explore whether the firms from Eastern and Central Europe follow the pecking order of financing. Does the pecking order concept underlie the motives for long term financing policies in industrial firms in emerging capital markets of Eastern and Central Europe?

In our research we analyze main effects which accompany IPO on emerging markets. We focus the attention on such countries as Russia, India, China, Brazil, Poland, Singapore, Malaysia, Egypt and other emerging markets. There are 161 placements in our sample which took place in 11 emerging markets. The major interest involves the effects accompanying privatization of state companies through IPO and how much retail investors win from participating in IPOs of the companies from emerging markets. We estimate the dependence of underpicing or initial return IPO (the price change measured from the offering price to the market price on the first trading day) and long-run IPOs performance from such factors as ownership of shares before placing (a state ownership/private property), origin of the company, shares allocation (retail/institutional investors), etc. Our research has revealed that retail IPO have the greatest initial return, than usual IPO. The hypothesis about the lower long-term yield of such placements in comparison with yield of the market is thus confirmed. Surprisingly, IPOs of the state companies have bigger underpricing (allowing investors to earn more in the first days of the quotations), than private companies IPO. However long-run abnormal return is also positive (at usual IPO it is negative in average) which shows that privatization IPO is a separate phenomenon. Country specific characteristics matter in retail IPO and sometimes the differences are crucial. Most of the peculiarities depend on the distinctions in institutional environment of the countries and the level of retail investors' participation in IPO. Moreover, countries authorities set various purposes at privatization of the state companies which could also affect IPO performance.

There are a lot of theories that explain the company's dividend policy. Most of them confirm the relationship between dividend policy and firm value. The decision to pay dividends is affected by many factors. These factors can vary significantly from country to country. The article represents an overview of the literature on dividend policy in developed and developing capital markets. It is focused on different aspects of dividend policy in developed capital markets: the information asymmetry, taxes, the emergence of agency costs, stock repurchases as an alternative method of payout policy. The basic determinants of dividend policy in developing countries are also analyzed.

The paper is based on the study devoted to the ownership structure impact on corporate performance through the integrated conception of corporate financial architecture. The object of the study is top Russian and Brazilian public non-financial companies in the end of crisis 2008 year. First of all, we contribute to the literature by applying the integrated approach to corporate performance modeling. Second, we study the changes in corporate governance mechanisms during the global crisis (2008) and their influence over strategic performance. Finally, we conducted cross-country analysis of performance models in two of four BRIC countries.

This paper analyses the main methods and results of academic researches testing Gibrat's law - the assumption of stochastic nature of corporate growth rates. Four versions of the Law are considered depending on the type of tested sample: all firms in an industry, companies that survive over the entire time period, only largest firms and newcomers. Analysis of corporate dynamics both in developed and in emerging markets indicates that Gibrat's law is likely to fail. Instead of being random, growth rates are determined by industry characteristics and firm-specific factors such as capital structure, R&D expenses, profitability etc. Gibrat's Law is accepted in some cases for large and mature companies but completely fails for newcomers. Thus, this conception can be viewed as a benchmark for researches in area of corporate growth but not as a strict regularity describing existing firm dynamics.

In this paper the authors model the impact of state ownership as a component of the corporate financial architecture on corporate performance and conduct a cross-country analysis of this effect in order to identify the geopolitical differences. The cross-country analysis is focused on the level of development of the institutional mechanisms, designed to protect minority shareholders. The major findings of the paper are in line with a number of research papers’ results obtained in the developed and emerging markets. The contribution of this paper is the joint analysis of two different factors: state ownership and investor protection level and the development of the corporate performance model taking into account the joint influence of these factors as well as their interrelation.

Current article is an overview of models of influence of intellectual capital over the corporate financial decisions, as a main factor, influencing the value of firms. The importance of intellectual capital has dramatically increased with the transition to the knowledge economy. Inclusion of factors of intellectual capital into the models of corporate financial decisions is a way to increase the quality of analysis. Despite the fact that the influence of the intellectual capital on firms and corporate financial decisions in developed markets of the USA and the Western Europe is a proven fact, the evidence from the emerging markets is still scarce. Current researches of corporate financial decisions rarely include intellectual capital as a factor. Current article demonstrates the results of inclusion of these factors. Results of analysis of early works show negative relationship between intellectual capital and both the level of financial leverage and dividend payout ratio. However, more recent research, considering the efficiency of utilization of intellectual capital, shows that relationship between the efficiency of utilization of intellectual capital and the level of financial leverage is positive. At the moment there is no direct empirical evidence of relationship between the efficiency of utilization of intellectual capital and the dividend policy.

 

The article presents the results of empirically testing the predictions of the dynamic trade-off theory on the data of 56 Russian medium-sized companies. We use the data from 2004 to 2008 and show that the management behavior follows the principles of the dynamic trade-off concept. According to our analysis, the optimal interval for the company leverage becomes narrower as the profitability, size, growth opportunities and tangibility of a firm increase. Statistically significant difference between the lower and upper bounds of the interval confirms that the management adjusts the debt level targeting the optimal interval but not a specific optimal level.

 

The article familiarizes the reader with key ratings of corporate governance. It is concerned with the goals, specific features and methodology of such ratings as well as the availability of such ratings for Russian companies. The paper gives consideration to both commercial and research ratings. On basis of the analysis of existing ratings and research papers it is concluded that a scientifically substantiated algorithm for a corporate governance rating has not yet been created.

 

The article gives an overview of influence of stock market discrimination on market value of companies in China. There are two types of shares on Chinese stock market: class A shares, which are available for domestic investors, and class B shares, which are available for foreign investors. Such market structure is not a unique Chinese market's feature. It is also used in such countries as Finland, Singapore, Switzerland, Thailand, etc. What differs Chinese market from markets with similar structure is the fact that class B shares are traded with substantial discount to class A shares. Such a situation is explained by such factors informational asymmetry between domestic and foreign investors; different liquidity of different classes of shares; diversification effect, connected with investment in Chinese stock market; size of companies; ratio of amounts of shares of different classes; stock exchange where company's shares are traded.

 

Тhroughout its life cycle, an organization must be viewed in terms of three key dimensions: liquidity, investment risk and actual value. That is why modern financial analysis measures the growth of a company, with the creation of its value factored in. The paper explores the sustainability of corporate growth based on the criterion of economic income, and proposes a toolset for growth analysis.

In this article the non fundamental value creation factors are described and their influence on investment behavior of Russian companies is analyzed. The accent is made on capital structure and its characteristics: level of concentration of equity capital, presence of different types of shareholders. The analysis of influence of CEO's motivation schemes on investment activity (using example of the share in the hands of top management). Estimation of non fundamental factors is carried out using a wide sample of Russian companies, made by an author using the data base Ruslana Bureau van Dijk. Regression analysis performed on this data allowed to verify the hypothesis of influence of non fundamental factors on investment activity. JEL Classification: G35, G32, G11, J33

In this article the capital structure and its characteristics such as level of concentration of equity capital, presence of different types of shareholders and their share are analyzed in the role of internal (non fundamental) factors, influencing on investment activity of russian companies, using capital expenditures. Estimation of these factors is carried out using a sample of Russian companies, made by an author using the data base Ruslana Bureau van Dijk. Regression analysis performed on this data allowed to verify the hypothesis of influence of these internal factors on investment activity taking into consideration the industry's specificity. JEL Classification: G35, G32, G11, J33

The capital structure researches, carried out on the emerging markets, are mainly devoted to the analysis of the companies' choice determinants of the debt to equity ratio. The fact that these problems stir a lot of interest to day may be explained by a number of reasons and, first of all, by lasting substantial capital market institutions' differences, the level and factors of investment risks that differ from those of the countries with developed market economy. The question of evaluating the degrees of influence similar determinants have on the long-term financial development of companies operating in different structures of the capital market is being posed. The dynamics and driving forces of possible changes in the emerging company capital structures on such markets are still to be investigated. Finally, there is a separate substantive issue of assessing the role of capital structure and its potential contribution in maximizing company value on the emerging markets.

This article is thus aimed at constructing a model that could describe the capital structure choice of the Russian major public companies. The two basic capital structure theories are being tested: the Pecking Order Theory and the Trade-off Theory. The article is presented in the following way: in the first part we give an overview of the research papers on the problem of capital structure in the emerging markets, the second part focuses on the methods used for testing the above mentioned theories and analyses of our sample of the Russian data and methodology, and, finally, in the third part we introduce and interpret the results of the empirical analysis.