Oligarchs, political regime changes, and firm valuation1


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    We are especially grateful to Sergei Guriev (the Editor) and two anonymous referees for detailed and insightful comments. Comments by participants at the 7th International Workshop on Corporate Governance and Investments in Jönköping, the Russia in Flux seminar in Turku, the Workshop on the Politics of Corporate Governance in Copenhagen, the Joint Finance Research seminar in Helsinki, the 19th Australasian Finance & Banking Conference in Sydney, the European Financial Management annual meeting 2007 in Vienna, and the research seminar at the Norwegian School of Management in 2007 are gratefully acknowledged. Financial support from the Finnish Academy of Sciences (the Russia in Flux program) and Stiftelsen för främjande av värdepappersmarknaden i Finland (Maury) is gratefully acknowledged.


This paper examines the impact of a regime shift on the valuation of politically powerful oligarch firms. Focusing on the Yeltsin–Putin regime shift in Russia, we find that the valuations of oligarch-controlled firms are significantly higher under the Putin regime than under the Yeltsin regime after controlling for industry and time effects. The findings suggest that the increasing cost of extracting private benefits outweighs the reduction in the value of political connections following the political regime change. The results are also consistent with changes in the risk of state expropriation. Our results indicate that effects driven by the political regime change complement the traditional view that increased ownership concentration improved the performance of Russian oligarch firms.