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Legal Weakness, Investment Risks, and Distressed Acquisitions: Evidence from Russian Regions

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  • Adachi, Yuko
  • Iwasaki, Ichiro

Abstract

This paper traces the survival status of 93,260 Russian business firms in the period of 2007–2019 and empirically examines the determinants of the acquisition of financially distressed companies (i.e., distressed acquisitions). We found that, of 93,260 firms, 50,743 failed in management, and among these distressed firms, 10,110 were rescued by acquisition during the observation period. Our empirical results indicate that, in Russian regions, the weakness of the legal system tends to increase the probability of distressed acquisitions, while other socioeconomic risks negatively affect it. These tendencies are common in most industries and regions. It is also revealed that, in the most developed area, monotown enterprises are more likely to be bailed out by acquisition after management failure than other firms, but it is not always true for the whole nation.

Suggested Citation

  • Adachi, Yuko & Iwasaki, Ichiro, 2022. "Legal Weakness, Investment Risks, and Distressed Acquisitions: Evidence from Russian Regions," RRC Working Paper Series 98, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:rrcwps:98
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    More about this item

    Keywords

    legal weakness; investment risk; financial distress; distressed acquisitions; Russia;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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