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22ГЛОБАЛЬНЫЕ РЫНКИ И ФИНАНСОВЫЙ ИНЖИНИРИНГ
Том 3 • Номер 3 • июль-сентябрь 2016 ISSN 2410-8618 Global Markets and Financial Engineering
издательство
Креативная экономика
Тестирование влияния корпоративной культуры и корпоративного управления на рыночную капитализацию международной фирмы в России
Зимрутян Г.А. 1
1 Российская академия народного хозяйства и государственной службы при Президенте Российской Федерации, Москва, Россия
АННОТАЦИЯ:_
Статья посвящена эмпирической проверке взаимосвязи между некоторыми аспектами корпоративной культуры и корпоративного управления на рыночной капитализации международной компании в России. Мы построили вопросник с использованием платформы Survey Monkey и провели опрос сотрудников международных компаний, работающих в России. Мы проанализировали следующие аспекты корпоративной культуры и управления: приверженность, корпоративная этика, организационный климат, и работа в команде. Изучается связь между выбранными аспектами корпоративного управления на уровне фирмы и культуры международных компаний, работающих в России и их рыночной стоимости в 2015 финансовом году, с использованием МНК, порядковые логистической регрессии, пол и положение эффектов.
КЛЮЧЕВЫЕ СЛОВА: корпоративная культура, корпоративное управление, капитализация фирмы
Testing the influence of corporate culture and corporate management on market capitalization of international firms in Russia
Zimrutyan G.A. 1
1 The Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia
INTRODUCTION
The interest in corporate culture and governance relationship with company's capitalization has exploded in the past three decades. The research from different countries is trying to find the influence of various nonfinancial factors on company's performance. However, the majority of the research papers were made examining the problem in developed markets and few empirical studies assessed the influence of organizational culture on organizational performance in developing countries.
While sometimes culture and governance are used interchangeably, it remains true that these are two terms which, in their strictest sense are tightly connected, need to be seen and examined in their correct and specific connotations and most of all, need to address and impact market capitalization. Essentially, corporate culture, formative function, based on policies, practices, protocols and procedures, is able to modify preferences of individuals at decision -making levels, and also offer those attractions on how to internalize corporate norms.
However, corporate governance, which is executor function, has four major constituents, like corporate strategy, the directional aspect of business, executive management functions or activities that enforce and implement strategy, thirdly, accountability and finally, supervision, which needs to be taken to the next levels of culture-induced culture, for now and for the future. Simply speaking, while governance is the modus operandi of business, the culture is the fabric by which this is infused along the business environment, the former the end, and the latter the means to gain this end.
Indeed, the influence of governance on culture is palpable, having much to do with how companies are directed, although without considering influences of markets and other external financial institutions. Does higher level of corporate governance and culture correspond to higher benefits that employees and management bring to company's stakeholders and the value of the company increases or is it rather explained by some other factors?
The study is not only significant but is also very relevant since there are no many studies
ABSTRACT:_
The article is devoted to the empirical testing of the relationship between some aspects of corporate culture and corporate governance on international firm's market capitalization in Russia. We have constructed a questionnaire using Survey Monkey platform and performed a survey of employees of international firms operating in Russia. We analyzed the following aspects of corporate culture and governance: commitment, corporate ethics, organizational climate, and teamwork. We study the relation between chosen aspects of the firm-level corporate governance and culture of international companies operating in Russia and their market values in 2015 financial year, using OLS, ordinal logistic regression, gender and position effects.
KEYWORDS: Russia, corporate culture, corporate governance, firm capitalization JEL-Classification: G32, M12, M16 Received: 02.09.2016 / Published: 30.09.2016
© Author(s) / Publication: CREATIVE ECONOMY Publishers For correspondence: Zimrutyan G.A. (gzimrutyan0yandex.ru)
CITATION:_
Zimrutyan G.A. (2016) Testirovanie vliyaniya korporativnoy kultury i korporativnogo upravleniya na rynochnuyu kapitalizatsiyu mezhdunarodnoy firmy v Rossii [Testing the influence of corporate culture and corporate management on market capitalization of international firms in Russia]. Globalnye rynki i finansovyy inzhiniring. 3. (3). - 217-226. doi: 10.18334/grfi.3.3.36117
conducted in Russia concerning the connection between corporate governance and corporate culture and company performance. There was a fast transition from the Soviet Union system, where there was no notion of corporate culture or governance in typical Western style. In fact, there was no competition and all companies were owned and controlled by the government. The mechanisms which regulated employees' behavior were different. Today Russia is a market economy with market rules. However, given this very new history of Russian market economy, possibly there are some particular features of Russian executives market, apart from compensation. Since it is young and new emerging market, there is a significant undercoverage of the issue in the academic literature. Some features were covered rather extensively, though. For example, Bernard S. Black, Inessa Love, Andrei Rachinski (2006) did elaborate research on influence of corporate governance in Russia on firm's value.
To study hypotheses that can emerge here, some data, statistics and information on cases should be available. First, what are the possible hypothesis?
1. Corporate culture and corporate governance have a positive effect on international firm's market capitalization in Russia.
2. New market economies, particularly Russia, feature particular traits of the market for corporate culture and corporate governance positive influence on firm's value.
To check these hypotheses, some quantitative measures should be obtained for some Russian companies. Some proxies should be used for this purpose. As for value, some unified measure should be chosen. We have constructed and conducted a survey and we have collected 87 responses afterward. We made an empirical cross-sectional analysis of these data in order to come to conclusions.
DATA DESCRIPTION
To obtain a unique set of data, the research analysis starts with the creation of an online survey on the platform, "surveymonkey.com.". The total number of the individual responses is 87. In the major set of the questions, the survey asks individuals about their perceptions of their companies (see Table 1) and the educational level of the company's CEO (1-5), the company's name, their best knowledge of the company's income. In the questions about their attitudes towards the company, the respondents were proposed to use the five-point scale with the levels: "Strongly disagree," "Disagree," "Neutral," "Agree," "Strongly." To evaluate the company's value in 2015, they could give the figure or choose from one of
ОБ АВТОРЕ:_
Зимрутян Гаяне Аршаковна, [gzimrutyan0yandex.ru]
ЦИТИРОВАТЬ СТАТЬЮ:_
Зимрутян ГА. Тестирование влияния корпоративной культуры и корпоративного управления на рыночную капитализацию международной фирмы в России // Глобальные рынки и финансовый инжиниринг - 2016. - Том 3. - № 3. - С. 217-226. doi: 10.18334/grfi.3.3.36117
the ranges. If the company's name was provided by the respondent, the capitalization figure was taken from the open sources.
After the analysis of the literature, we choose to test some aspects of corporate culture and governance, that are widely discussed in literature and have been tested in other countries. (Guiso, Luigi and Sapienza, Paola and Zingales, Luigi, 2013, Black, Love Rachinsky 2005, Black, Bernard S. and Kim, Woochan and Jang, Hasung and Park, Kyung Suh, 2008, Balasubramanian, Bala N. and Black, Bernard S. and Khanna, Vikramaditya S., 2010). These are commitment, organizational climate, corporate ethics, teamwork, corporate governance (in our analysis 'corporate governance' term means the perception by the employees of management of the company and their work).
We have asked respondents 15 questions, each of them we refer to one of the categories discussed above (see appendix). Finally, we have got 87 responses.
We have checked the obtained data for endogeneity and omitted variable problem and performed the regression analysis using linear and logistical ordinal regression. Firstly, the actual answers to each question (Q1-15) were treated as independent variables. Then we referred the questions to categories described above and tested them separately and grouped in different ways. Finally, we tested the indices combining all tested aspects together, constructed using latent variables.
FINDINGS AND DISCUSSION
Our analysis reveals that organizations that provide regular high-quality training for employees have higher capitalization. Those training help them to progress in their job. The training factor could be referred both to corporate governance and corporate culture. Training make employees more efficient, help them to gain new skills and develop their competence what subsequently improves company's performance and makes it more valuable for shareholders.
Our findings are similar to the results of large research made by Mckinsey in 2014. According to Mckinsey, evaluating which employees' and managers' skills influence sales performance and that show how well employees implement them are crucial for efficient allocation of training resources and for an actual increase in sales.
Factor Q8 demonstrating "the positive linkage between employee's work, his group's priorities and the company's strategic objectives" was also significant at 15 percent confidence level and the OLS revealed adverse effect. This means that employees see negative influence of their work on company's objectives or that their work and tasks are inconsistent with company's objectives. Both he OLS and original logistic models revealed a negative effect. This means that at average a clear vision of linkage of the company's priorities among employees is associated with a lower company income. In this case, most probably, there is no causal connection from the independent to the dependent variable. The most plausible hypothesis is that the correlation is due to that in smaller (and hence with less income)
businesses, its employees better understand what is going on in their company in general.
It was revealed that organizational climate has a positive effect on firm's capitalization. Positive work environment motivates employees and makes cooperation more effective.
Moreover, data showed that managers see that people from different departments share information among each other to coordinate their efforts and this fact increases firm's capitalization. Although, this aspect, which we referred to corporate ethics (and could also be referred to corporate climate) was insignificant if all data set was tested. Thus, our analysis demonstrates that managers in international firms in Russia feel that they are more interrelated, and their cooperation increases company's value and performance. We suppose that this aspect is present because managers in international corporations are often foreigners or have experience of working abroad in developed countries, where corporate culture and governments principles are more mature and developed.
Other factors tested were insignificant in our model: OLS and logistic regression. The indices on corporate governance and culture, constructed using all factors tested were also insignificant in OLS and ordinal logistic regression. However, the sample size tested was low only 87 respondents and one should draw any conclusions very carefully. We could not decline the hypothesis of the positive effect of our index. We suppose that we should test it one more time using a larger sample.
Our second hypothesis is saying that new market economies, particularly Russia, feature particular traits of a market for corporate culture and corporate governance positive influence on firm's value also could not be declined. The analysis of literature and the results of our model revealed that Russia is still at the stage of formation of the free market and corporate governance and corporate culture in its typical Western and American sense. The difference in corporate cultures in Russian and non-Russian companies is observable.
Also, changes in economic paradigms influenced the Russian firms and raised the importance of corporate values as opposed to national values and culture. Until recently, one could clearly distinguish between Russian and foreign companies. This has significantly changed. Nowadays, many international firms, consultancies, financial institutions are working in Russia, and they are influencing the corporate culture norms and values of local companies. However, since 2014, when US and Europe implemented financial sanctions against Russia, the movement of foreign capital inflows to Russia declined sharply. This hinders the functioning of international companies in Russia.
Moreover, many foreign top-managers, expats are leaving Russia. This aspect will probably influence corporate culture and governance style in Russia and could make it more «Russian».
The practical significance of the obtained results and the applied approaches is primarily about the possibility of the improvement of analytical tools for analysis of companies and development value approach to strategic management by the companies. It should be noted that for the development of practical methods for assessing the factors influencing the firm's value and for strategic cost management, the market needs proper corporate governance and
corporate culture ratings. This rating should be adapted for usage of appropriate techniques and may be published by independent agencies. Therefore, corporate governance and culture could be standard quantified and compared among each other.
CONCLUSION
What is bad management and what is good management? What is good corporate culture and what is bad? These notions are not obvious and cannot be interpreted literally. Much depends on the particular period of time, country and industry. This paper digs into the factors which shape and defined good and bad corporate culture and governance and how good level of corporate culture and governance affects firm's value. Nowadays, good corporate governance and corporate culture are recognized by many researchers as important for creating a positive organizational climate and making a company attractive for investors.
Although a combined index was statistically insignificant across all regressions, our analysis revealed that corporate training have a positive effect on company's capitalization and the connection between employee's actions and work and general company's objectives have a negative influence on firm's value. Moreover, managers view that interconnection between people from different departments also has a positive influence in capitalization. No specific gender effects were revealed.
As a result of our analysis, we came to the conclusion that companies in Russia feature particular traits of the market for corporate culture and corporate governance. We should make further research on the topic if the influence of nonfinancial factors on company's performance, testing our indexes and factors using a large sample.
Some readers may suggest that Russia will copy the path of Europe concerning many phenomena of market economies, including strong corporate culture and corporate governance principles. However, we do not consider likely that Russia will simply walk by the same steps that other countries have walked before, many years ago. In its current state the country is and will be influenced by the external world. When other countries walked their evolution paths years ago, they did not experience the same influence and therefore they were in different conditions. This means that it is not easy to predict what will happen to corporate governance and culture influence on firm's value. In medium run in the light of increasing isolation, western sanctions and increasing presence of government in economy it is reasonable to assume that the development of governance and culture government-related international companies will be one of the most important factors, surpassing ability to improve efficiency, create goodwill, pay high dividends and as a result create higher company's capitalization. Low level of informational transparency may have its toll on the unpredictability of influence of nonfinancial factors on performance and value as well, leaving too much for the personal factors rather than market influence and accountability to stakeholders.
APPENDIX
Table 1.
Please answer how you personally feel about the statement in your present job?
Q1 People in my organization have an opportunity to be involved in decision-making process.
Q2 I feel that my personal work does contribute to organizational performance.
Q3 Management's actions match its words.
Q4 Management is honest and ethical in its business practices.
Q5 People responsible for quality and safety management, are fully aware of their responsibilities and are competent to carry them out.
Q6 Teamwork is strongly significant in my organization and every member of the team contributes to the common goal.
Q7 People from different departments always share information among each other to coordinate their efforts.
Q8 I can see a clear linkage between my work, my group's priorities and the company's strategic objectives.
Q9 Most leaders in the company symbolize the values and beliefs of the company.
Q10 My company has clearly established core values, including business ethics principles.
Q11 The established corporate ethics and culture principals are highly respected by the employees.
Q12 The work environment in my organization is very positive.
Q13 Company organizational culture supports safety of employees.
Q14 Organization provides regular high quality trainings for employees which help them to progress in their job.
Q15 People in my organization have positive and respectful relationships.
Questions 1-2 refer to commitment, questions 3-5 refer to corporate governance, questions 5-6 refer to teamwork, questions 7-11 refer to corporate ethics, questions 12, 13 to organizational climate, 14 - trainings, 15 - peer relationship.
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