Does strategic corporate performance depend on corporate financial architecture? Empirical study of European, Russian an
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Does strategic corporate performance depend on corporate financial architecture? Empirical study of European, Russian and other emerging market’s firms Irina Ivashkovskaya • Anastasia Stepanova
Published online: 18 February 2010 Springer Science+Business Media, LLC. 2010
Abstract 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 I. Ivashkovskaya (&) A. Stepanova Corporate Finance Center, Corporate Finance Department, Higher School of Economics, Moscow, Russia e-mail: [email protected] A. Stepanova e-mail: [email protected]
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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. Keywords Corporate governance Boards Performance Financial architecture Ownership structure Emerging markets
1 Introduction There are several key structural dimensions within the firm that are at the agenda of research due to their decisive role and potential impact over corporate performance. The dominant majority of empirical studies concentrates on examining the relationship between each dimension and performance separately. Firstly, it concerns the research on ownership str
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