Thursday, July 19, 2018

Politically Connected Board Members Help Russian Firms Attract Investment but Don’t Necessarily Make Them More Profitable, New Study Says

Paul Goble
            Staunton, July 19 – Under the terms of the Putin system, many Russian firms have been required to take on as members of their boards of directors politically well-connected officials or parliamentarians; but until now, no one has investigated whether that makes these firms more successful or not.

            Now that has changed. Two researchers, Anna Gladysheva of the Higher School of Economics and Yuliya Kishilova, an analyst at M&A Partners, have explored that question and published their findings (“The Influence of Political Connections and State Property on the Activity of Firms in Russia” (in Russian), Journal of Corporate Finance Research, 1(2018): 20-40 at; summarized at

            Numerous studies by others about the impact of the politically connected on corporate success have been published, they point out. These studies show that such people make both positive and negative influences, they continue; but Russian scholars have generally avoided what is inevitably a politically sensitive topic.

            Their overall conclusion is that “the presence of officials, parliamentarians of those affiliated with them increases the investment attractiveness of the firm but does not increase its profitability of make its access to credit easier,” a finding that echoes that of foreign researchers on companies elsewhere.

            Gladysheva and Kishilova reached that conclusion on the basis of an analysis of 106 industrial companies out of the list of 295 which received state assistance during the 2008-2009 economic crisis. Specifically, they found that

·         Businesses with such people on their boards did not show significantly greater profitability than those without them,

·         Having such people on the boards helped until their share of members reached 27 percent; after that, the impact was negative.

·         Such people on boards did not lead the companies to take on more debt than those similarly situated.

·         But it did lead to confidence among some companies with such people on their boards that they could weather any problem because they had a friend at court as it were. 

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