nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2007‒01‒02
three papers chosen by
Anna Y. Borodina
Perm State University

  1. Bankrtuptcy in Russia: External Management Performance By Zakolyukina Anastasia
  2. Are Russian Commercial Courts Biased? Evidence from a Natural Bankruptcy Experiment By Lambert-Mogiliansky, Ariane; Sonin, Konstantin; Zhuravskaya, Ekaterina
  3. Effects of the 2004 Personal Income Tax System Reform on the Shadow Sector in Ukraine By Koziarivska Larysa; Oliinyk Andrii

  1. By: Zakolyukina Anastasia
    Abstract: The project examines the performance of the external management procedure on the data set from the arbitration court of the Udmurt Republic and the unique data set of politically connected firms that went bankrupt 1995–2004 in Russia. We use a narrow definition of political connections: a CEO or a member of an executive board being a member of par-liament or a top executive at the federal, regional, or municipal level. We show that political connections matter for the timing of bankruptcy procedures. Also, political connections do not result in efficiency-enhancing bankruptcies; in line with a politicians-and-firms story, politically connected firms preserve employment rather than increase productivity. Based on the court level data, we find that debt concentration increases likelihood of external management initiation, whereas external management itself decreases the share of total debt repaid. However, there is no evidence of adminis-trative expenses inflation in favor of a particular unsecured creditor under the assumption of a tradeoff between inflation of administrative expenses and main debt repayment.
    Keywords: Russia, bankruptcy, external management, liquidation, political connections
    JEL: G33 G38 P16
    Date: 2006–12–18
  2. By: Lambert-Mogiliansky, Ariane; Sonin, Konstantin; Zhuravskaya, Ekaterina
    Abstract: We study the nature of judicial bias in bankruptcy proceedings following the enactment of bankruptcy law in Russia in 1998. We find that regional political characteristics affected judicial decisions about the numbers and types of bankruptcy procedures initiated after the law took effect. In particular, controlling for indicators of firms’ insolvency and the quality of the regional judiciary, reorganization procedures were significantly more frequent in regions with politically popular governors and governors who had hostile relations with the federal government. Poor judicial quality was also associated with higher incidence of reorganizations. In addition, the quality of the regional judiciary affected performance of firms in reorganization procedure: in regions with poor judicial quality firms in reorganization significantly underperformed firms not in bankruptcy; while the opposite was true in regions with high-quality judges. The effect of judicial quality on restructuring is particularly strong in regions with politically popular governors because the judicial bias in governor’s favor is the highest in poor-quality courts when governors are popular. This evidence is consistent with previously reported anecdotes, which suggested that politically strong regional governors used bankruptcy proceedings to protect firms from paying federal taxes.
    Keywords: bankruptcy; capture; incentives; regional governments; Russia; transition
    JEL: D23 G33 H11 H77
    Date: 2006–12
  3. By: Koziarivska Larysa; Oliinyk Andrii
    Abstract: The paper researches into the consequences of the pit reform of 2004 introduced on tax revenues, shadow activities, and income streams. The research approach adopted involves constructing theoretical general equilibrium model adapted to Ukrainian practices and further empirical testing of the hypotheses on the firm-level data. The study leads to inferring that the reform did not stimulate any tangible structural changes in the economy; with no effect on the shadow sector size. As a result of the reform, the government's income in the form of PIT revenues was redistributed to firms. The research shows that under the present conditions no other rate is expected to perform better the existing rate. Within the framework of existing structural ties in the economy it would be beneficial to increase compliance by introducing a more severe punishment for evasion.
    Keywords: Ukraine, tax reform, tax policy, tax evasion, shadow economy, behavioural response
    JEL: D21 E64 H21 H25 H26 H32
    Date: 2006–12–18

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