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  • ­­­The empirical analysis of corporate financial decisions of innovative companies under conditions of the global transformation to an innovative type of economy

­­­The empirical analysis of corporate financial decisions of innovative companies under conditions of the global transformation to an innovative type of economy

Priority areas of development: economics
The project has been carried out as part of the HSE Program of Fundamental Studies.

Goal of research:

The goal of the research is to determine key specific features of financial decisions and corporate financial architecture of knowledge intensive firms, operating on the largest emerging markets (BRICS) and developed capital markets. We focus on the capital structure decisions and the role of taxation, financial architecture policies, and strategic deals in the market for corporate control for large-scale firms from this group of countries. We examine the relationship between all above-mentioned types of decisions and corporate value of knowledge intensive firms.


  • regression analyses of cross-section and panel data;
  • correlation analyses;
  • non-linear modeling;
  • regression analyses with the help  of logit and probit models;
  • cluster analyses;
  • method of events (event study analyses);
  • neural networks.

Empirical base of research:

data collected from BRICS and Western Europe companies, as well as large companies from developed capital markets (USA) and companies from rapidly developing countries (South Korea, Singapore, Malaysia, India and South Africa).  We use such resources of information as information agency Bloomberg, Thompson Reuters Eikon, Capital IQ, Compustat, Bureau Van Dijk analytical agency, SPARK-Interfax information system, as well as sites of the companies, sites of FSFM, national stock exchanges, and resources of the World Bank.

Results of research:

As a result of the study of 51 American public companies we received the amount of indirect costs of financial instability for 9 sectors of the US economy. We consider firms which have signs of innovation (the issue of spending on R & D), and conduct the bankruptcy procedure between 2000 and 2016. So, the maximum level of indirect costs of financial instability (49%) was found in the companies of consumer sector, 35% of the level of profit loss was identified for industrial companies. For energy companies and information technology, the level of costs of financial instability was 32%. In the telecommunication, medicine, and production of materials industry, the level of costs was estimated at 25% - 27%. The lowest costs of financial instability have been identified in the public utilities sector, where the share of the company's loss of profit was 21%.

To examine the impact of taxation on the capital structure of companies, we conducted a survey on the sample of 729 innovative companies with the use of various tax preferential programs: the Intellectual property box regime, the R & D Tax Credit and the Investment R & D Super Deduction for the period from 2006 to 2016. As a result of the study, it was found that with an increase in the tax rate on profit, innovative companies raise financial leverage. As for the innovative companies in the "R & D Tax Credit" program, the effect of taxation on the level of financial leverage of the companies turned out to be insignificant.

We identify the factors that affect indirect costs of financial instability in a study of the financing policy of innovative companies. Analyzing 89 innovative companies, the share of current assets in total assets, the share of cash flow in current assets, were the main factors that significantly affect the cost of financial instability, the proportion of net working capital in current assets. At the same time, the growth in the share of current assets and net working capital in the company's total assets leads to an increase in the costs of financial instability, and the increase in cash flow, on the contrary, leads to a reduction in costs.

A study of a sample of 6,109 companies in Western Europe from 2013 to 2016 showed that the choice of the determinants of financial sustainability for innovative and non-innovative companies varies. According to the results of the study, the performance of the company affects the amount of costs of financial instability only for non-innovative companies. It was also found that the costs of research and development have a direct and indirect impact on the costs of financial instability: the costs of research and development affect the likelihood of bankruptcy and positively on the amount of costs. It was confirmed that trade credit plays a significant role in mitigating the consequences of financial problems.

In order to identify the size of the costs of financial instability, an analysis of the indicators of 398 innovative companies was carried out during the period from 2006 to 2015. The analysis is based on the assessment of direct and indirect costs of financial instability firms. Direct costs were estimated using panel logistic regression, and indirect costs were calculated as lost profit or unforeseen income in comparison with industrial indicators. The study confirmed the relationship between spending on R & D and financial instability of enterprises. As a result, the study showed that the costs of financial instability of innovation firms are 7.95% of total assets, or 11.78% of the company's value on average.

On a sample of innovative US firms from the Russell 3000 index between 2004 and 2015, (17,999 observations) it was found that the traditional determinants of the corporate structure, such as size, age, assets, profitability and the ratio of the market to book value, can not fully explain why high-tech firms follow the zero-debt policy. It was found that high-tech firms are more financially limited than non-high-tech firms, a hypothesis that was tested if it were not for innovative firms, and it was proven that the excess cash explains the low financial leverage of US innovation companies.

In the cross-country analysis of mergers and acquisitions, on a sample of 129 high-tech and 214 low-tech M&A transactions, initiative companies from fast-growing communities (South Korea, Singapore, China, Malaysia, Brazil, Russia, India and South Africa) high-tech mergers and acquisitions, on average in all the windows examined, show higher accumulated excess cost than in the low-tech. Also, experience of the firm has a positive impact on deals in the high-tech business group. The institutional development of the target country has a favorable effect on surplus revenues in the case of high-tech mergers and acquisitions, but negatively affects the success of low-tech transactions.

Cluster analysis of 84 large Russian companies in period from 2010 to 2015 (417 observations) allowed to divide the Russian market into 8 clusters, from which only 6 were identified as stable. The resulting distribution was improved by quality tests and the construction of a similarity matrix. The results showed that the most efficient clusters contain firms with predominant state property, as well as companies with a high level of corporate governance and diluted capital. Thus, the conclusion is made that in Russia the success of a company depends either on a motivated internal owner with ties or on high standards of corporate governance. In different companies, representatives of the central government can be either a direct owner or an independent council. It was also found that the size of the board of directors and the choice of the chairman are important factors that significantly influence the decision-making mechanisms in the company. Finally, we show the importance of optimizing the capital structure: in particular, a stable financial architecture was not found among Russian firms with low or zero debt levels.

To analyze the financial architecture in rapidly developing markets we collected data for 11 countries: India, China, Russia, Poland, Greece, Hungary, Croatia, Czech Republic, Turkey, Brazil and Mexico. The final sample consists of 4,675 companies in the period 2011-2015. Using cluster analysis at each stage of the life cycle we investigated 3 types of clusters that differ from one another. It was revealed that the financial leverage has a negative impact on companies at all stages of the life cycle; however, at the stage of recession, the financial leverage is not significant. The analysis showed that the corporate governance is one of the most important components of the financial architecture, which has a significant positive effect on the performance of companies. According to the study, the ownership structure has a different impact on the performance of companies, depending on the stages of the life cycle and its factors. One of the main factors were institutional investors, which have a positive impact on the efficiency of companies.

A study was conducted on the largest American firms from the Russell 3000 index, with a total sample of 1,085 firms between 2004 and 2015 (12,565 observations). The sample was divided into 642 firms from the technology sector, and 443 companies from the non-technology sector. The study showed that different types of investors have different effects on the performance of high-tech US companies. A new classification was developed: we divided the entire pool of institutional investors into four categories: gray, independent, state and strategic. In addition to this division, we identified two main investor`s strategies: active, passive. The results of the research showed that the performance of innovative US companies is influenced not by the size of the shareholding of the first five major shareholders, but by the type and strategy of this investor. Thus, in our study, gray institutional investors have a negative influence on the performance, but in the context of the ownership concentration they turned out to be insignificant. Independent institutional investors exerted a positive influence on the performance of high-tech companies, and in the context of concentration of ownership, it was the passive type of these investors that had a significant and positive impact. Because of the small presence of state owners in the ownership structure, their influence was insignificant. A positive connection was also found between Tobin Q, ROA and the concentration of ownership in the hands of strategic investors. There was a negative correlation between the independence of the board of directors and the performance of innovative companies. In order to demonstrate the importance of the intellectual capital, we collected information on CEO from 600 CV. It was concluded that in innovative companies, intellectual capital plays an important role, which may exceed in importance the role of types of investors in the ownership structure of companies.

Analysis of 109 public Russian firms in the period from 2003 to 2014 showed that in companies with a greater share of private ownership the results of the CEO's performance are evaluated based on the company's profitability, not taking into account industry trends. Also, it was proven that the success of the company positively depends on the independence of the board of directors, especially for private sector companies. Results of logit model testing showed that the presence of the MBA degree in CEO does not affect the relationship between the efficiency of companies and the probability of change CEO but the degree of doctor of science has a positive impact on this relationship.

Level of implementation,  recommendations on implementation or outcomes of the implementation of the results

The results were presented at 11 Russian and international conferences in Moscow, St. Petersburg, Glasgow (Great Britain), Xiamen (China), Frankfurt (Germany) in 2017. The results of the research are also presented in 8 papers: 3 articles have already been published in domestic and foreign scientific journals; other 5 papers are prepared for publication. In particular, 2 articles are prepared for publication in journals indexed in Scopus, 1 preprint was written for the HSE series. We also prepared 2 collective monographs. One monograph is indexed in WoS. The obtained results are also presented at the research seminar of the School of Finance of the Faculty of Economic Sciences of the Higher School of Economics "Empirical studies of corporate finance".

Application area:

Due to the theoretical results obtained,  we succeeded in improving the educational process of the HSE School of Finance through the following activities: (1) materials, developed with the help of project implementation, are included in advanced lecture master courses "Corporate Finance-2", "Strategic Finance of the Firm" and "Behavioral finance", read on the master's program "Strategic management of the company's finances"; (2) research models developed in the process of projects were used in the scientific master's seminar "Empirical Corporate Finance" as part of the Master's program "Strategic Management of the Firm's Finances". Results obtained were also used in the lecture courses of the Higher School of Economics such as Executive MBA Doctor of Business Administration programs for the top management of Russian companies. Using the results we also develop new intensive programs in the field of finance for business within the School of Finance of the Faculty of Economic Sciences of the Higher School of Economics.

Economic significance:

A significant part of the results can be used in the practice of management of innovative companies: the results of the project on the financing policy with regard to the role of tax factors can be used to justify the borrowing policy, the  findings connected with  the  peculiarities of companies with zero debt are significant for the policy of refusing loan financing for innovative companies; the results of the M & A study can be used by management and board of directors to identify key determinants of value creation in emerging capital markets. The revealed interrelation between the intellectual capital of the board of directors, its structure and the efficiency for the largest Russian companies enables to improve the quality of corporate governance.


Kokoreva M. S., Stepanova A. N., Повх К. С. Could high-tech companies learn from others while choosing capital structure? // International Journal of Business Innovation and Research. 2018
Stepanova A. N., Izabella G. Kazaryan. Financial Architecture in the Different Life Cycle Stages // Journal of Corporate Finance Research. 2017. Vol. 11. No. 4. P. 11-35. doi
Kokoreva M. S., Stepanova A. N., Повх К. С. Could High-Tech Companies Learn from others while Choosing Capital Structure? / National Research University Higher School of Economics. Series WP BRP "Basic research program". 2017. No. 62/FE/2017.
Makeeva E. Y., Khugaeva M. Evaluation of Financial Distress Costs at Innovative Companies // Russian Management Journal. 2018. Vol. 16. No. 1. P. 37-62. doi
Anilov A. Behavioral aspects of decision-making on payments to owners: review of studies // Journal of Corporate Finance Research. 2017. Vol. 14. No. 4. P. 67-86. doi