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Legal Weakness, Investment Risks, and Distressed Acquisitions: Evidence from Russian Regions.
1Russian Research Center, Institute of Economic Research, Hitotsubashi University, Tokyo, Japan.
Comparative Economic Studies
|December 19, 2022
Summary
Weak legal systems in Russia increase distressed acquisitions. Socioeconomic risks decrease these rescues, with exceptions in developed areas and monotowns.
Area of Science:
- Business and Economics
- Corporate Finance
- Russian Economy
Background:
- Examining the survival of 93,260 Russian businesses (2007-2019).
- Identifying factors influencing distressed acquisitions.
- Understanding management failure and rescue mechanisms.
Purpose of the Study:
- To empirically analyze the determinants of distressed acquisitions in Russia.
- To investigate the impact of legal and socioeconomic factors on acquisition probability.
- To explore regional and industry-specific patterns in distressed firm rescues.
Main Methods:
- Survival analysis of Russian business firms.
- Econometric examination of acquisition determinants.
- Comparative analysis across industries and regions.
Main Results:
- 50,743 out of 93,260 firms experienced management failure.
- 10,110 distressed firms were acquired during the study period.
- Legal system weakness positively correlates with distressed acquisitions; socioeconomic risks show a negative correlation.
Conclusions:
- Legal system fragility is a key driver for distressed acquisitions in Russia.
- Socioeconomic risks generally deter such acquisitions, though patterns vary regionally.
- Monotown enterprises in developed areas show a higher likelihood of acquisition post-failure.
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