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Corporate Financial Architecture and Financial Decisions in Knowledge Intensive Firms

Priority areas of development: economics, management


Our purpose is to find differences in the motives of strategic financial decisions, in the corporate financial architecture and their influence on the value of innovative companies (knowledge intensive firms, KIFs) on the basis of the interdisciplinary approach to study of business models, specifics of capital formation and operating results of such companies.

The object of this research is large companies from emerging capital markets of BRICS countries (Brazil, Russia, India, China and South Africa), Western Europe and developed capital markets (USA) as well as large companies of fast-growing countries (South Korea, Singapore, Malaysia, Indonesia). The subject of the research is corporate financial decisions related to the choice of the financing policy, building of the corporate financial architecture, strategic transactions of purchase of corporate control. Corporate decisions are considered from the point of view of their motives and influence on efficiency of innovative companies.

Methods Applied

  • regression analysis of cross and panel data;
  • correlation analysis;
  • regression analysis using logit and probit models;
  • event study analysis;
  • speech analysis on the basis of audio recordings
  • instrumental variables for work with the data in which endogeneity is possible.

Empiric study base

The data collected within the studies concerning companies from BRICS countries and Western Europe, as well as large companies of developed capital markets (USA) and companies from fast-growing developing countries. Resources of the information agency Bloomberg, Thompson Reuters Eikon, Capital IQ, Compustat, analytical agency Bureau Van Dijk, the information system SPARK-Interfax, sites of national stock exchanges and official sites of the companies included in the sampling which provide information on audited financial statements of companies, sites of the Federal Commission for Securities Market, resources of the World Bank were used as the information base.


Subproject 1 Corporate Financing Policy:

  • Using the sampling of 415 nonfinancial corporations from Russell 1000 index for the period of 2012-2018 it was confirmed that there are steady clusters of companies which are characterized by analogous parameter values which approximate the governing motives of keeping large cash balance. It was found out that for clusters consisting of smaller and younger companies with high opportunities for growth the motive of conservatism and financial flexibility in the financing policy is more apparent. It is shown that companies from all clusters accumulate money for the transactional motive;
  • We identified the factors which influence the possibility of bankruptcy of innovative companies including CEO personal characteristics and their influence on the probability of existing of financial fraud in the company. It is shown in the sampling of records of conference calls analyzed by Praat and LIWC programs which have been made by large public companies (388 companies from the non-fraud category and 20 companies from the fraud category) managed by English speaking chief executive officers for the 3rd and 4th quarters of 2018 that simultaneous use of financial and non-financial factors for identifying financial fraud provides for increase of accuracy and efficiency of applied forecast methods in comparison to the models based on separate use of various groups of factors. There was detected existence of a significant interconnection between the vocal and semantic signals in CEO’s public speeches (non-financial factors) and the possibility of financial fraud. Besides there was discovered a significant influence of a higher level of powers the chief executive officer possesses (financial factor of the group of factors of corporate management) on the probability of commitment by the company of actions characterized as financial fraud.

Subproject Efficiency of Mergers and Other Purchases of Companies found out:

  • Using the sampling of 138 mergers and acquisitions deals of companies partially owned by the government from Brazil, India, Indonesia, China, Colombia, Malaysia and Russia which were closed in 2011-2018 there was found out influence of existence of government ownership in the company capital from developing countries on efficiency of M&A deals. It is shown that government ownership influences positively the deal efficiency. Also purchase of a public, traded company as a target has positive effect; while the size of the purchased share and choice as the target of a company from a high-technology industry has a negative effect;
  • influence of geographical location on merger efficiency using data of 433 deals of high-technology companies from the USA for 2010-2017 applying the event study analysis. A significant negative influence of geographical distance on the accumulated excess profitability is shown; if the target company is located in a large city it has a stronger effect on profitability in high-technology M&A deals. Efficiency of local M&A deals for purchasing companies is higher if the target company is a high-technology one.

Subproject Corporate Financial Architecture:

  • Using the sampling from Russell 3000 index influence of various types of institutional investors on the corporate innovative efficiency is shown. New classification of investors’ types is introduced. The following has been proven: a positive effect of the property possessed by passive institutional blocking owners on growth of corporate innovation; a positive effect of independent investors and negative effect of black investors; non-linear link between the insider property and patent corporate operations; negative influence of government ownership in the capital of such companies;
  • Using the sampling of 102 American companies in the period of 1999 to 2017 it is shown that involvement of the company's founder in business as CEO entails investment of large amounts in research and development, marketing and a lesser probability of distribution of profit as dividends among the company shareholders. Our results confirm the conclusions made in this research field before, thus increasing knowledge about companies managed by their founders;
  • Using the sampling of 100 largest Russian companies in the period of 2009 to 2017 a positive effect of intellectual capital (board capital) on corporate efficiency measured through future operational performance (return on equity) and Tobin's Q is shown. It was found out that CEO’s strong power measured applying the CEO’s power index decreases the amplitude of positive influence of the board of directors’ capital;
  • Using the sampling of USA companies from Russel 3000 index influence of CEO’s personal characteristics on the choice of the forms of the policy of payments to shareholders (direct dividends or redemption of shares), initiating transfer to payments and change of the forms of the payment policy was studied. On the basis of the author’s quality index of the board of directors it was found out that efficient boards of directors may decrease negative characteristics of influence of CEO’s personal characteristics in the field of payments.

Extent of Implementation, Recommendations for Implementation and Results of Implementation of R&D Results

Extent of implementation:

The results are stated in 11 reports in Russian and international conferences in Moscow, Saint-Petersburg, Brussels (Belgium), Lisbon (Portugal), Ponta Delgada (Portugal), Coventry (Great Britain). The results of researches are represented in 8 publications: 2 articles are published in foreign scientific journals indexed in Scopus, 3 articles are in Russian journals, 1 preprint is published in the series of the National Research University Higher School of Economics and 2 multi-authored monograph one of which is published in the series for the publishing house Springer named Advanced Studies of Emerging Markets Finance. The obtained results are also represented in several reports at the research seminar of the School of Finance of the Faculty of Economics of the National Research University Higher School of Economics Empirical Study of Corporate Finance.

Field of application:

Due to the obtained theoretical results the research managed to improve the teaching and learning process of the School of Finance of NRU Higher School of Economics by applying the following measures: (1) materials developed in the process of the projects’ execution are included in advanced lecture master’s courses Corporate Finance-2, Corporate Strategic Finance and Behavioral Finance given in the master's program Strategic Management of Corporate Finance; (2) research models developed in the process of execution of the projects of the Scientific University Laboratory were used in the scientific master’s workshop Empirical Corporate Finance as part of the master's program Strategic Management of Corporate Finance. A range of results was used in the lecture courses given in the Higher School of Management of NRU Higher School of Economics in the programs of Executive MBA Doctor of Business Administration for senior managers of Russian companies as well as in development of the package of new intensive programs related to finance for business within the scope of the School of Finance of the Faculty of Economics of NRU Higher School of Economics.

Economic significance:

A significant part of the results may be used in the practices of management of innovative companies: results of the project dedicated to the financing policy as regards the role of maintaining of large cash balances for financing of innovative companies’ activity; results of the research dedicated to analysis of mergers and acquisitions deals may be used by the management and boards of directors to identify the key conditions and factors of creating the value in the emerging capital markets; uncovered dependencies between the intellectual capital of the board of directors, its structure and efficiency of operations of the largest Russian companies may facilitate enhancing the quality of corporate management.

Significant results for improvement of analytical work in the companies which render consulting services were obtained: the results of the financial architecture projects are important for improvement of quality of consulting services in the field of strategy especially in the Russian market.


Guseva O., Stepanova A. N. Owners and CEOs of Startups: Evidence from Russia // Корпоративные финансы. 2019. Vol. 13. No. 1. P. 107-119. doi
Karnoukhova E., Stepanova A. N. Does Smart & Powerful CEO Contribute to the Performance of Technology Companies? // Корпоративные финансы. 2019. Vol. 13. No. 4. P. 39-58. doi
Murashkina I., Mikhaleva I., Makeeva E. Y. The impact of R&D tax incentive programs on the performance of innovative companies // Foresight. 2019. Vol. 21. No. 5. P. 545-562. doi