Reveal of transparency’s impact on cost of capital and companies performance in Russia

Abstract

Authors: Alexander Alexandrovich Tikhonov National Research University The Higher School of Economics

Natalia Mikhailovna Tikhonova

The subject of this investigation is transparency and its impact on Russian companies’ performance. On the one hand, it is considered that high level of transparency reduces informational asymmetry, mitigates agency problem and adverse selection, and helps financial market to function efficiently. But Russia is a developing country with high level of corruption ( 154place in Corruption Perceptions Index 2010)and weak property rights protection. So it is costly to firms to have high level of disclosure quality because there is considerable probability of state interference in business in Russia. Thereby high level of disclosure is a trade-off between the benefits from investors’ confidence and the costs of potential expropriation by predatory government. The article considers review of transparency investigations, its impact on company performance depending on internal and external conditions, different ways to estimate transparency, it contains the results of panel regression analysis of transparency in Russia on the period 2009–2011. The investigation includes 129 largest Russian companies.