Ownership Structure and Firm Performance in Russia The Case of Blue Chips of the Stock Market

All opinions expressed here are those of the authors and not those of the Economics Education and Research Consortium. Research dissemination by the EERC may include views on policy, but the EERC itself takes no institutional policy positions Based on panel data from 1995 – 1997, the paper focuses on the impact of ownership structure on the performance of Russian non-financial privatized companies that constitute the group of "blue chips" of the country's stock market. We find that ownership concentration results in higher technical efficiency of enterprises, but benefits from productivity improvements do not adequately materialize in higher profitability and market value of companies. This is consistent with the expropriation hypothesis that large owners use their power to extract private benefits of control. We also find that the association between ownership by different groups of owners and firm performance is relatively weak and subject to reversed causality. There is evidence that ownership by Russian non-state shareholders negatively affects firm value suggesting that this group of owners is inclined to the extraction of private benefits of control. for comments and helpful suggestions. All remaining mistakes are our own.