Have firms with better corporate governance fared better during the recent financial crisis in Russia?

Abstract

We assess whether during the recent (2008–2009) financial crisis in Russia firms with better corporate governance have experienced a milder decline in stock prices and market value as well as lower stock price volatility. Using a structural break analysis, Ordinary Least Squares (OLS) and Instrumental Variable (IV) techniques, we find that firms that had better corporate governance prior to the crisis suffered a smaller decline in both stock prices and market value. We report no evidence of statistically significant relationship between corporate governance and volatility of stock prices.

Keywords:

• Russia
• corporate governance
• financial crisis
• stock prices

JEL Classification:

• G34
• G19

Notes

¹ Calculated as (market cap + Book Value (BV) of current liabilities+ BV of long-term liabilities)/BV of total assets.

² In Russia, first 10–11 days of January are nonworking days due to extended celebration of New Year and Orthodox Christmas. Thus, 15 January is conventionally regarded as the start of business year.