Alliances and corporate governance

We study the link between a firm's quality of governance and its alliance activity. We consider alliances as a commitment technology that helps a company’ Chief Executive Officer overcome agency problems that relate to the inability to ex ante motivate division managers. We show that well-governed firms are more likely to avail themselves of this technology to anticipate ex post commitment problems and resolve them. The role of governance is particularly important when the commitment problems are more acute, such as for significantly risky/long-horizon projects (“longshots”) or firms more prone to inefficient internal redistribution of resources (conglomerates), as well as in the absence of alternative disciplining devices (e.g., low product market competition). Governance also mitigates agency issues between alliance partners; dominant alliance partners agree to a more equal split of power with junior partners that are better governed. An “experiment” that induces cross-sectional variation in the cost of the alliance commitment technology provides evidence of a causal link between governance and alliances.     

The rocky road to modernity: 20 years of the Russian capital market

From a modest start almost 20 years ago, the Russian financial market has emerged as a major force in Eastern Europe and Central Asia. This article offers a retrospective account of the two decades of development of the financial sector in Russia, with an emphasis on the securities market; outlines the main stages in its development; and proposes an assessment of the capital market in comparison to other international markets. We conclude with an overview of the market's performance during the current financial crisis. © 2011 Wiley Periodicals, Inc.     

Barter in the Russian Economy: Classifications and Implications (Evidence from Case Study Analyses)

This article addresses Russia's barter economy. Using interview data, it examines the mechanics of barter settlements and classifies the main types of non-monetary transactions. The major reason for barter is lack of a competitive monetary system. In the 1990s barter represented a specific vehicle to perform settlements. Barter itself is not a way to evade taxes or to defraud enterprises of assets. But barter changed the motivation of enterprises and led to systematic distortion of accounting data. The low transparency of the barter economy creates barriers for investment and restructuring. The barter economy is an insider's economy. The lack of affiliated entity regulation and mechanisms for disclosure of transactions with related parties stimulates insiders to criminal application of barter and monetary surrogates. Barter has become a profitable business for a number of important economic agents including financial intermediaries affiliated with top managers of the biggest privatised enterprises and government agencies.     

Delegation to a possibly ignorant agent

In a delegation problem, an uninformed principal delegates decision‐making powers to a biased and possibly ignorant agent. The principal cannot use monetary payments but can restrict the set of the agent's choices. I show that in the general case, the principal may offer a disconnected set of choices. In a setting with arbitrary bias the uncertainty principle holds—the principal benefits as the likelihood that the agent is informed increases. When the bias is constant, I show that the ally principle holds—the principal benefits as the bias becomes smaller. Finally, when the likelihood of the agent being informed is determined by the agent's effort, then for small biases the principal benefits from limiting the agent's choice. When the agent is sufficiently biased, the principal gives more choice to the agent, so as to to improve incentives for information acquisition.     

Weak and strong laws of large numbers for arrays of rowwise END random variables and their applications

In the paper, the Marcinkiewicz–Zygmund type moment inequality for extended negatively dependent (END, in short) random variables is established. Under some suitable conditions of uniform integrability, the \(L_r\) convergence, weak law of large numbers and strong law of large numbers for usual normed sums and weighted sums of arrays of rowwise END random variables are investigated by using the Marcinkiewicz–Zygmund type moment inequality. In addition, some applications of the \(L_r\) convergence, weak and strong laws of large numbers to nonparametric regression models based on END errors are provided. The results obtained in the paper generalize or improve some corresponding ones for negatively associated random variables and negatively orthant dependent random variables.     

The informational effects of competition and collusion in legislative politics

We use a mechanism design approach to study the organization of interest groups in an informational model of lobbying. Interest groups influence the legislature only by communicating private information on their preferences and not by means of monetary transfers. Interest groups have private information on their ideal points in a one-dimensional policy space and may either compete or adopt more collusive behaviors. Optimal policies result from a trade-off between imposing rules which are non-responsive to the groups' preferences and flexibility that pleases groups better. Within a strong coalition, interest groups credibly share information which facilitates communication of their joint interests, helps screening by the legislature and induces flexible policies responsive to the groups' joint interests (an informativeness effect). Competing interest groups better transmit information on their individual preferences (a screening effect). The socially and privately optimal organization of lobbying favors competition between groups only when their preferences are not too congruent with those of the legislature. With more congruence, a strong coalition is preferred. Finally, within a weak coalition, interest groups must design incentive compatible collusive mechanisms to share information. Such weak coalitions are always inefficient.