Do good governance provisions shelter investors from contagion?Evidence from the Russian crisis

Abstract This paper studies how the Russian crisis of 1998 affected listed firms in transition economies. The data cover 394 companies that were listed before the Russian crisis, and include financial, industry, ownership and stock market information. Results show that in the short term (within one...

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Bibliographic Details
Published in:The economics of transition 2007-01, Vol.15 (4), p.807-824
Main Author: Pajuste, Anete
Format: Article
Language:English
Subjects:
contagion
Corporate governance
Data analysis
Economic crisis
Economic recovery
Enterprises
F30
Firm theory
G15
G30
Investment
Russian crisis
Russian Federation
Transition economies
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Summary:Abstract This paper studies how the Russian crisis of 1998 affected listed firms in transition economies. The data cover 394 companies that were listed before the Russian crisis, and include financial, industry, ownership and stock market information. Results show that in the short term (within one month of the crisis) good governance did not shelter investors from contagion. On the contrary, stock returns during the crisis period were lower for the largest and most liquid stocks and markets in the region irrespective of their direct exposure to Russia. The paper also documents that in the longer term (one year after the crisis) recovery was faster in firms without direct trade exposure to Russia, as well as in firms with better firm-level governance as proxied by the presence of a foreign blockholder. The paper presents evidence that both firm- and country-level characteristics are important in overcoming the effects of a crisis. Firm-specific characteristics, however, play a bigger role for companies operating in countries with weaker corporate governance.
ISSN:0967-0750
2577-6975
1468-0351
1468-0351
2577-6983
DOI:10.1111/j.1468-0351.2007.00298.x