Analysis of Risk Tolerance of the Systemically Important Russian Companies

The current position of our country in the global economy and the recent financial crisis have shown the need for a comprehensive study of the practice of risk management in companies. In the phase of economic crises, the risk of insolvency of the company is most acute and may provoke the collapse of the country's largest enterprises. In Russia, the issues of the governmental support for large companies are regulated by the List of the systemically important enterprises. This creates the notion that that such “too big-to-fail” policies distort the risk incentives of such firms. This means that crisis and risk management in companies are often ineffective and firm may take excessive risks. Thereby, this paper investigates the link between the firm size, governmental support and risk-taking among Russian enterprises during the period of 2013—2017 and make three conclusios. First, size is positively correlated with risk-taking measures even when controlling for other firm characteristics. Second, the level of the company's insolvency risk depends on the motivation of a member of the Board of Directors. Respectively, in all estimated specifications, governance variable, measured as the median director ruble stockholding, has a substantial impact on reducing firms’ risk-taking. Third, companies with the status of systemically important, tend to take more risk. These findings suggest the need to expand counterclaims to enterprises and their shareholders for financial recovery in case of governmental support and guarantees.