Abstract
Modern understanding of the corporation as an integrated system driven by a common goal of profit maximization has brought both economic theory and management practices to a deadlock. Incorrect understanding of the modern corporation’s core, as well as inability to adequately assess them, became one of the causes of the global economic crisis. One of the promising “reanimation” options of the modern firm theory is the institutional approach. However, this approach is in dire need of measurable operational criteria and indicators that would tie business practices together with their basic theoretical categories: institute, contract, and transaction costs.The scope of this paper is to offer and demonstrate the possibilities of testing methodology for assessing the corporation as an institutional unit of an economic system. To do so, we propose a new approach in the assessment of institutional compliance of the corporations with the expectations of their major subjects. It is based on estimating the distribution of the gross added value between the subjects. Moreover, the technique of assessing the level of transaction costs in corporations, based on data accounting, is proposed. The methods were tested on examples of real Russian metallurgical industry corporations as reported between 2003 and 2012. The presence of a statistically significant negative connection between the share of value added revenue and level of transaction costs, as well as between the share of value added at the owners disposal and the transaction costs level, was established. The presence of a statistically significant positive connection between the level of transaction costs and share of value added, at the disposal of workers, was established.
Highlights
IntroductionEconomic perturbations had occurred in the last two decades, including corporate scandals in America; the global economic crisis and almost forgotten collapse of the Asian stock markets have a common motive in its root—the inability of economic entities (traders, bankers, analysts, academics, and government officials) to assess the current situation
Economic perturbations had occurred in the last two decades, including corporate scandals in America; the global economic crisis and almost forgotten collapse of the Asian stock markets have a common motive in its root—the inability of economic entities to assess the current situation
We present here a new approach to the institutional side of the corporation based on the calculation of indicators of their value added structure and level of transaction
Summary
Economic perturbations had occurred in the last two decades, including corporate scandals in America; the global economic crisis and almost forgotten collapse of the Asian stock markets have a common motive in its root—the inability of economic entities (traders, bankers, analysts, academics, and government officials) to assess the current situation. The current system of assessing the economics and its critical actors, corporations, is hopelessly outdated. Those accounting criteria, which are usually considered important—profit amount and structure of assets, have long been controlled variables in the hands of an experienced accountant. Almost “bare” in terms of such measures is a promising direction of economic science—institutionalism, whose basic concepts, of institutions and transaction costs, are not properly quantified. This is mainly due to the difficulty of passage from the analysis of the theoretical categories to specific events. The practical evaluation of these indicators, for the Russian metallurgical companies, was conducted
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