I. Iwasaki. Corporate Law and Organizational Choice: Open versus Closed Joint-Stock Companies in Russia
V.4, N3, 2006
The vast majority of Russian corporations, including many manufacturing and communications firms, are still compelled to become closed joint-stock companies (JSCs) that lack a modern mechanism in order to attract capital from a wide range of private investors. Using the results of a Japan-Russia joint enterprise survey conducted in 2005, we examine a variety of factors as to why Russian stock companies select to become closed companies. Our empirical results suggest the following four factors encouraging many of Russian firms to be closed JSCs: (a) a widespread insider-dominating corporate ownership structure emerging as a result of the mass-privatization policy; (b) a strong orientation among managers toward closed corporate organization due to the underdeveloped capital and managerial markets; (c) slumping needs for corporate finance; and (d) insufficient financial support from local financial institutions.