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International Laboratory of Financial Economics

Contacts
Head of Laboratory:
Vladimir Sokolov
vsokolov@hse.ru
(495) 772-95-90 *27094

Manager (academic issues):
Sergey Konyshev
Skonyshev@hse.ru
(495) 772-95-90 *27085

Manager (financial issues):
Alexander Pryanichnikov
apryanichnikov@hse.ru
(495) 772-95-90 *27078

11 Pokrovsky Boulevard, building T, Moscow, 109028, Russia
(495) 772-95-90 *27085,
lfe@hse.ru

Publications in 2014

The Real Effects of Financial Constraints: Evidence from a Debt Subsidization Program Targeted at Strategic Firms

	Author: Sokolov V., Yulia Davydova Journal of Empirical Finance, Volume 29, December 2014, Pages 247-265. We investigate the rationale and impact of the corporate debt subsidization program implemented by the Russian government during the recent financial crisis. Employing the difference-in-difference approach, we show that the program did not have a significant impact on capital investments of subsidy recipients, contrary to its intentions. We also find that a matched group of non-recipients on average exhibited a higher degree of cash hoarding behavior than subsidy-recipients in the post-program period, which suggests that the program eased external financial constraints of recipient-firms. Consistent with the theory on precautionary cash savings by firms, we further find that firms non-recipients based in cities with low banking development accumulated more cash holdings than recipients based in cities with a high banking development. Overall, our findings indicate that greater cash holdings are positively associated with the level of financial constraints of firms. To the article

Firm value in crisis: Effects of firm-level transparency and country-level institutions

	Author: Stepanov S., Enikolopov R., Petrova M. Journal of Banking & Finance, Volume 46, September 2014, Pages 72-84. Recent empirical research suggests that country-level and firm-level governance institutions are substitutes with respect to their effect on firm value. In this paper we demonstrate that during a crisis these institutions may actually become complements. Specifically, we find that the decline in companies’ valuation during the financial crisis of 2007–2009 was more sensitive to firm-level transparency in countries with stronger investor protection. We propose a theoretical model that reconciles our findings with the results in the literature. In our model, during “normal times” strong firm-level governance is crucial to attract outside financing in countries with weak investor protection, but is less important in countries with good investor protection. During a crisis, however, investment opportunities decline even in countries with strong investor protection, and, as a result, relative importance of firm-level governance increases in such places. To the article

Liquidity and the Marginal Value of Information

	Author: Boulatov А., Taub B. Economic Theory 2014, 55 (2), pp. 307-334 We revisit Kyle's (Econometrica 53:1315-1335, 1985) model of price formation in the presence of private information. We begin by using Back's (Rev Financ Stud 5(3):387-409, 1992) approach, demonstrating that if standard assumptions are imposed, the model has a unique equilibrium solution and that the insider's trading strategy has a martingale property. That in turn implies that the insider's strategies are linear in total order flow. We also show that for arbitrary prior distributions, the insider's trading strategy is uniquely determined by a Doob h-transform that expresses the insider's informational advantage. This allows us to reformulate the model so that Kyle's liquidity parameter λ is characterized by a Lagrange multiplier that is the marginal value or shadow price of information. Based on these findings, we can then interpret liquidity as the marginal value of information. To the article

Privatization and Survival - Evidence from a Russian Firm Survey

	Author: Sprenger K. Economic Annals 2014, 59 (200), pp. 43-60 This study is dedicated to an important aspect of the long-run performance of firms, namely their survival under rapidly changing conditions in a transition economy. The analysis is focused on the question of whether privatization and ownership structure have affected the likelihood of liquidation and bankruptcy of firms in Russia. We use a sample of 497 privatized and non-privatized firms that were surveyed in 1999-2000, and for which information was collected about their survival status and reasons for exit, such as bankruptcy, mergers and court decisions. More than 38% of the sample firms were liquidated over the period 1999 to 2013. We find that privatization and the choice of privatization option have no effect on the long-term survival of firms in Russia, but that managerial ownership lowers the likelihood of both liquidation and bankruptcy. Other transition-specific predictors of bankruptcy, such as the extent of price controls and the amount of wage arrears, affect firm exit in a significant way. To the article

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