Yulia Ilina

The structure of corporate boards and private benefits of control: Evidence from the Russian stock exchange

This paper revisits the role of board size and composition in corporate governance, employing a measure of private benefits of control (PBC) as an indicator of governance problems in firms. We calculate PBC using the voting premium approach for a sample of dual class stock companies traded on the Russian stock exchange between 1998 and 2009. Using fixed-effects regressions, we find a quadratic relationship between PBC and board size, implying the optimality of medium-sized (about 11 directors) supervisory boards. This result is substantially stronger for PBC than traditional measures of corporate performance. There is also some evidence that director ownership helps to mitigate governance problems. Most remarkably, we find that non-executive/independent directors are associated with larger PBC and thus do not seem to help improve corporate governance. In contrast, regressions with accounting performance measures as dependent variables tend to suggest a positive role of these directors in corporate governance.

Intellectual capital of a board of directors and its elements: introduction to the concepts

Purpose – The purpose of the study is to define the contribution of intellectual capital of the Board of Directors in generating intellectual capital of a company, to develop a definition of the intellectual capital of the Board of Directors, as well as two of its major elements: human capital (knowledge, skills, and experience of Board members, etc.), and social capital (relationships and networking opportunities of Board members), and to clarify the relationship between these elements and financial performance indicators of companies based on a literature review on the topic. Design – A literature review and analysis was applied as this study’s research design. Findings – The authors suggest that intellectual capital is generated not only by company staff, but also by governing bodies, particularly the Board of Directors, whose members are not always under contract with the company in the traditional sense. Members of the Board use their knowledge, experience, and networking opportunities to build intellectual capital for effective monitoring, advising, and providing the company with resources. In this sense, the Board of Directors serves as a source of intellectual capital for a company, being the main internal corporate governance mechanism that leads to value creation in a company, taking into consideration the interests of all stakeholders. Practical implications – The research indicates that the personal characteristics of Board members may influence the performance of a company. Therefore, companies should be recommended to carefully select candidates for nomination to the Board. Originality – This study contributes to further development of the concept of intellectual capital of the Board of Directors by bringing together the theory in the field and the empirical results of studies on the various elements of Board capital in a company’s value creation.

Dynamic Approach to Defining Intellectual Capital of Board of Directors and Its Structure

Nowadays the value of modern companies is mainly created by intellectual capital. Paper analyses different approaches to defining intellectual capital of a company and its elements. We present and support the authors’ point of view that intellectual capital of a company can be generated by internal and external stakeholders of a company. While admitting the importance of all affiliated stakeholders of a company, the authors of the paper focus on the board of directors as the most important mechanism of corporate governance. The paper provides the definitions of the board of directors’ intellectual capital and its two elements, human capital and social capital. The latter concepts are based on the dynamic approach. Based on literature review of empirical papers we reveal the relationship between different elements of intellectual capital of board of directors and companies’ financial performance indicators.

Board structure, board committees and corporate performance in Russia

Purpose The purpose of this paper is to investigate the link between board structure and performance of public companies in Russia – an emerging market with unique institutional background and a variability of corporate governance (CG) practices across its companies. Design/methodology/approach Panel data analysis was applied on a sample of 207 Russian companies that frequently traded in the Russian Trading System during the period 2007-2011, in order to test hypotheses on the relationships between board size, board independence, gender diversity, presence of board committees and financial performance, as measured by Tobin’s Q. Findings The results show a positive relationship between Tobin’s Q and the board’s gender diversity. The analysis demonstrates that smaller and bigger boards are associated with a greater Tobin’s Q value. Originality/value The findings provide additional evidence of how board structure is related to its effectiveness and corporate performance in countries with concentrated ownership, highly variable CG practices and a lack of proper implementation of corporate law and governance codes. The paper contributes to the existing empirical evidence on the advantages of small and large-sized boards and on gender diversity, and is the first investigating the relationship between Russian companies’ board committees and market-based performance. The results regarding board independence and committees suggest that these mechanisms are still not widely recognized for their role in CG and company performance in Russia.

How Does Stock Market React to Dividend Surprises? Evidence from Emerging Markets of India and Russia

ABSTRACT In this article the authors empirically investigate information content of dividends announcements and average reaction of emerging markets of India and Russia to dividend surprises on the postcrisis period 2010 to 2014. The study applies an analysts’ expectations-based approach rarely used in academic literature. The authors conclude that the Russian market on average reacts negatively to good and bad dividend surprises; good dividend surprises on average trigger positive abnormal returns on Indian stocks, whereas bad and no surprises are associated with negative reactions of the Indian market. Results of the study are discussed from the perspective of dividend signaling theory, market efficiency, and investor behavior.

The Russian Market Reaction to Dividend Surprises: An Empirical Study

The article investigates reaction of the Russian stock market to dividend announcements in the period 2010–2014. In the study the problem is examined from dividend “surprises” perspective. The idea behind this approach is that market participants’ dividend expectations are assumed to be built on the basis of publicly available analysts’ forecasts. As a proxy for dividend surprise the difference between the announced dividends and the consensus analyst forecast is used. No studies with the use of the dividend “surprises” model in the context of Russian market were conducted before, thus, the present research contributes to the testing of the signaling theory of dividends on the Russian stock market. The research was conducted using event study methodology on the sample of 40 Russian public companies, which regularly pay yearly dividends. Obtained results of the study provide grounds to make conclusions about the fact that Russian market on average reacts negatively to both good and bad dividend surprises. The research confirms conclusions, which were drawn in the previous “naive” studies of the Russian market reaction to dividend announcements. In the research results are discussed from the perspective of market efficiency, investors’ expectations and their corresponding behaviour, as well as from the view of Russian market state in the period of study.

Owners, Boards, Managers and the Private Benefits of Control:A Study of Dual Class Stock Firms in an Emerging Market

This paper investigates whether and how various characteristics of CEOs and corporate boards are related to the severity of corporate governance problems within firms. The latter is proxied by private benefits of control, which we measure for dual class stock firms using the voting premium approach. Our empirical analysis is based on data from Russia and takes advantage of the extreme corporate governance problems in the country, considerable variation in corporate governance practices across firms and over time, and presence of a large and exogenously created (during the process of privatization) group of dual class stock companies. The data are assembled from the RTS, SKRIN and SPARK databases and include over 200 firms observed in 1997-2009, with over 1000 observations in total. Our econometric analysis suggests a quadratic relationship between private benefits of control and CEO ownership with a minimum at about 4% CEO ownership, a positive association between CEO tenure and private benefits, and a quadratic in CEO age with a dip in private benefits at about 52 years of age. There is also a quadratic relationship between private benefits of control and board size, implying the optimality of medium-sized (about 9-10 directors) boards. We find no gender effects on private benefits of control.