State shareholding and value of Russian companies

During the last 13 years thousands of enterprises were privatized in Russia. However, the Russian state still owns large stakes in many companies, including some of the largest publicly traded enterprises. At the same time the Russian stock market has experienced a tremendous growth during the last several years attracting domestic and foreign investors. These investors can be concerned about the possible “value-effects” of government shareholding. Therefore in this paper I study the impact of state shareholding on corporate value. One of the implications of the “grabbing hand” theory proposed by A. Shleifer and R. Vishniy is that government shareholding affects corporate performance and value. After analyzing the sample of the Russian publicly traded enterprises I provide some empirical evidence supporting this view. However I also find that relationship between government shareholding and corporate value is not monotonic, but U-shaped, i.e. after a certain threshold state shareholding can have a positive impact on corporate value. The latter finding corresponds with the results obtained by L. Tian in his study of Chinese firms