Russian Business groups : ownership and control, performance and market structure
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The focus of this thesis is the impact of business groups on company performance and the evolution of market structure in Russia. Business groups’ control of a large share of industry is a distinguishing and controversial characteristic of the Russian transition. This thesis contributes to the quantitative analysis of the economic impact of Russian business groups. The first chapter analyses the gap between control and ownership in Russian companies. We find a significant difference in the size and structure of the total gap compared to the component resulting from the use of pyramidal ownership structures. Our results suggest that standard estimators that account only for the pyramidal effect might be biased by the presence of endogeneity and measurement error problems. The second chapter examines the impact of business groups on company performance. In a majority of specifications, including the use of instrumental variables, we find that business groups have a consistently insignificant impact on the productivity growth of companies they control. This conclusion contrasts with previous studies of the impact of Russian business groups on firm performance. The third chapter tests the applicability of Sutton’s sunk costs theory of market concentration to Russian industries. Our results are consistent with Sutton’s theoretical predictions that concentration in industries with endogenous sunk costs does not decrease with market size.