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Foreign Directors in Russian Companies: the Effect on Firm Performance

Student: Fadeeva Anna

Supervisor: Alexander Muravyev

Faculty: St.Petersburg School of Economics and Management

Educational Programme: Economics (Bachelor)

Final Grade: 10

Year of Graduation: 2017

The study addresses the effect of ethnic board diversity on the Russian firm’s performance indicators using a quantitative approach based on the data for all Russian companies listed in the RTS/MICEX/MOEX during the period from 2007 to 2013. The foreigners’ presence is one of the important characteristics of the corporate board. While in the world and, in particular, in Russia, the popularity of the diverse boards of directors is growing, the real impact of the foreign directors’ presence on the effectiveness of the board and firm performance is ambiguous theoretically and difficult to detect empirically. Up to now, this topic has not been fully investigated in terms of Russian companies’ experience and this study is the first to address it in details, which explains the relevance of the research. As part of the work, we analyze foreign and Russian-language literature on corporate governance, collect extra information about firms and incorporate the pooled cross-section and panel data regression analysis as well as a two-step estimation method with instrumental variables. The results of this study indicate that the presence of foreigners on Russian corporate boards is positively correlated with firms’ market performance indicators (Tobin’s Q, Market-to-book ratio), but the main hypothesis about causal relationship was not confirmed: we cannot claim that hiring more foreign directors will result in a better firm performance.

Full text (added May 17, 2017)

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