Monitoring the Monitor: Oligarch Networks and Organizational Transparency in Russian Listed Firms

Abstract

Can ownership networks and corporate governance practices alleviate institutional voids in an emerging economy? We examine resource dependence (i.e. power asymmetries) and agency (i.e. information asymmetries) in ownership networks and highlight the conditions under which ownership networks provide resources for firm growth through investments. Using Russian panel data, we find that when public institutions do not support information disclosure and contract enforcement, controlling owners may compensate by setting up networks that facilitate the exchange of resources and alignment of interests. When power asymmetries arising from controlling ownership are pronounced, firms can reduce information asymmetries among shareholders by committing to transparency and disclosure practices, or multiple major shareholders can discipline one another. Agency costs can thus be mitigated by “monitoring the monitor.”