The virtues and weaknesses of insider shareholding

Kuznetsova, Olga and Kuznetsov, Andrei (2001) The virtues and weaknesses of insider shareholding. Journal of East-West business, 6 (4). pp. 87-104. ISSN 15286959

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Abstract

Following privatization in Russia, insider shareholders secured supremacy in their companies in most cases. The literature concerned with corporate governance in Russia frequently shows too much affection to the claim that the arrangement when control is allocated to insiders is generally sub-efficient in the long run. It is often concluded that the current pattern of control has negative impact on the progress of reforms. This paper argues in favor of a more balanced view, which takes into account the social responsibility of firms towards stakeholders and the influence the latter have over corporate performance. The question addressed is how real the insiders' threat is in privatized Russian enterprises with regard to the advancement of reforms and development of the workable corporate governance system.