Organization and Development of Russian Business A Firm-Level Analysis_10 docx

Corporate Restructuring and Performance 215 by the state, although Russia’s modern history shows that, even if this rule is true, frequent and significant exceptions to it are allowed. There are two alternative concepts of the BG impact on subsidiaries. One is that of the BG as a means of protection of a subsidiary against the external environment (Yakovlev & Danilov 2007), and the other is that of the BG as an initiator of active restructuring aimed at increasing competitiveness (Pappe & Galukhina 2006). The difference between these concepts lacks depth because the subsidiaries in both cases increase their competitiveness due to BG membership. Therefore, the two concepts provide a basis for different hypotheses concerning the comparative efficiency of BG members and non- members. In the former case, BG member enterprises may not display higher productivity than independent enterprises. The main role of amalgamations is to give independent enterprises a boost in reaching the level of compara- ble companies. The results of Guriev and Rachinsky confirm precisely this concept of BG impact on comparative productivity and competitiveness of enterprises incorporated in groups. In the latter case, a BG member can be expected to demonstrate higher productivity; the role of amalgamation is to enable members to gain leadership in relevant industries. Testable hypotheses and data Our goal in this chapter is to examine the hypothesis that Russian BGs have a positive impact on subsidiary enterprises and to evaluate the correctness of the existing ideas about the impact of the Russian BGs on the conduct and performance of their member enterprises. According to these concepts, subsidiaries in BGs are relatively large enterprises 1 that experience, possibly because of their size, greater difficulties in a market-oriented restructuring. Membership in groups promotes the sales of enterprises and more active restructuring. More active restructuring can compensate for a later start of transformations but does not guarantee that a merged enterprise achieves leadership in the market. This is the reason that subsidiaries within groups may not display higher productivity. The analysis of the impact of a BG on competitiveness is seriously com- plicated by the nonhomogeneity of the groups and group members. In the previous chapter, it was reported that participants of merger processes 2 after privatization refer to themselves as BGs, as do enterprises that have belonged to major companies from the moment of their creation, for instance, power- generating units and local communication networks. The impact of parent companies on the conduct and performance of these two types of subsidiar- ies can vary substantially. In the latter case, it is difficult to determine the impact because the BG is a natural form of the asset’s allocation, organiza- tion, and subordination. Our study compares the activity of group members and independent enterprises. Subsidiaries representing only part of the business rather than 9780230_217287_11_cha09. dd 215 5/14/2009 11:06:13 AM 216 Organization and Development of Russian Business the business as a whole are selected for survey purposes from the entire sam- ple of BG members. To show the impact of transactions concluded after an enterprise is privatized, group member subsidiaries are classified according to the time of the merger deals that occurred before or after 1995, which was the last year of mass privatization. In some cases, industries will be categorized as regulated and nonregu- lated in order to reflect the specifics of the impact of head companies on the conduct of subsidiaries in groups. The performance results are influenced by state tariffs and returns on investment regulations. On the whole, the impact of membership in holdings in regulated industries on the finan- cial and operative performance of subsidiaries can be expected to be not as strong as it would be in nonregulated industries. We will verify the hypothesis that membership in BGs has a favorable impact on the activeness of enterprises in restructuring (H1) and on the financial and operative performance (H2) of enterprises. At the same time, members of holdings merged after privatization do not demonstrate sustain- able resource productivity advantages over independent companies (H3). The chapter is organized as follows: the next paragraph is an assessment of the role of a BG by directors of the affiliated enterprises. In the following section, the impact of group membership on the restructuring activity of subsidiary enterprises is analyzed. The third paragraph is a consideration of the performance indicators of subsidiary companies vis-à-vis independ- ent enterprises. Finally, the fourth paragraph introduces a comparison of the TFP in affiliated companies with independent ones. A summary of the results of the empirical analysis is presented in the Conclusion. Managers of subsidiaries on the advantages of being members of BGs In our survey, the gains from an affiliation with a BG for the directors of the enterprises can be assessed by two indicators. The first is which party initiated the affiliation with the group, and the second is what advantages the enterprise obtained from operating as a member of the group. The key role in initiating the merger of an enterprise was played by the owners of the parent company by more than 40% of the respondents. However, in a third of all cases, the initiative came from the private owners of other com- panies as well. The answers give the impression that, in Russian industry, the role of friendly takeovers is comparable to that of hostile takeovers. The impact of state administrations on the federal or regional level as initiators of corporate integration is relatively modest and is negligible for mergers in nonregulated industries. It is important to emphasize that most BGs are the result of private and not state decisions. Responses to the question about the advantages gained by their companies by belonging to BGs confirm the notion that, for directors, competitiveness 9780230_217287_11_cha09. dd 216 5/14/2009 11:06:14 AM Corporate Restructuring and Performance 217 on the market on the whole is more important than relations with the state. In accordance with the two alternative concepts of the role of Russian BGs, that is, as a tool to protect against the external environment and as the driving force of restructuring, a subsidiary’s advantages can be classified as protective or active gains. Protective gains include the strengthening of bar- gaining positions in relationships with the state and protection against hos- tile takeover. Active gains involve the improvement of competitiveness in the market and the enhancement of investment availability. Protective gains are more important for group participants that merged before privatization and during initial property distribution (Figure 9.1). BG participants that merged after 1995, on the contrary, associate greater value with the gains connected with the companies’ market competitiveness, that is, stronger positions on the domestic and world market and access to investments and new technologies. Support in relationships with the state is more important for subsidiaries that lack independent experience in a market economy. On the whole, the evaluations of the gains from participation in BGs made by enterprise directors support the H1 and H2 hypotheses. An important source of additional advantages for subsidiaries from group membership is internal financing. This could be important, especially in view of Russia’s underdeveloped financial markets. Until now, evidence on internal financial markets in Russian BGs has been controversial. Earlier stud- ies (Perotti & Gelfer 2001) confirmed the hypothesis about their existence, 3 but later studies did not (Shumilov & Volchkova 2005). According to our survey, in companies affiliated with groups, the second and third most important financial sources of investment are shared by bank borrowings and group funds (15–20%). About one-third of the respondents reported that they do not use group funds for financing their investment. The size of 0 10 20 30 40 50 60 70 Strengthened marketing position Received access to investments and new technologies Protected from hostile takeover Strengthened bargaining position in relation with state No gains Merged before 1995 Merged since 1996 Figure 9.1 Gains from joining business groups (BGs) according to directors of enter- prises by time of merger (% of respondents) Source: Author’s illustration based on survey data. 9780230_217287_11_cha09. dd 217 5/14/2009 11:06:14 AM 218 Organization and Development of Russian Business this share differs significantly depending on the industry. The highest share of such enterprises is in electric power (about 60%) and construction mate- rials (50%), with lower shares in the chemical and petrochemical indus- try (22%) and light industry (17%). At the same time, about one-quarter of affiliated firms consider internal financial markets to be important, with the share of group funding in overall investments being more than 20%. 4 The use of an additional source of funding of restructuring should also sup- port hypothesis H1. To sum up, top managers of group companies acknowledge the positive impact of affiliation with a BG on competitiveness and firm performance. However, their statements need to be verified. The question of whether enterprises use additional sources of financing for restructuring and not for compensation to make up for shortfalls will be answered. Another issue that will be examined is whether higher restructuring activity improved their financial and operative performance and led to higher productivity. Impact of business integration on corporate restructuring A comparison of the intensity with which independent companies and group subsidiaries engaged in restructuring demonstrates that the latter applied measures aimed at the increase of competitiveness more often dur- ing 2001–2004 (Figure 9.2). The superiority of BG participants is particularly clear in the area of restructuring involving production expansion, namely, successfully introducing new technologies and making significant capital investments. However, a considerable number of respondents had joined 0 20 40 60 80 Successful introduction of essentially new products and services Introduction of new production facilities Increasing of expenditures on marketing and advertising Successful introduction of new technologies Successful certification according to international strandards Making of significant capital investments Increasing R&D expenditures Long-term (over one year) credit Increasing volume of export Independent enterprises Merged before 2000 Merged since 2001 Figure 9.2 Restructuring activity in subsidiaries of BG vis-à-vis independent companies Source: Author’s illustration based on survey data. 9780230_217287_11_cha09. dd 218 5/14/2009 11:06:14 AM Corporate Restructuring and Performance 219 groups in the same period when restructuring had become more active. It is noteworthy that new subsidiaries that merged after 2001 displayed the highest degree of activity aimed at the restructuring of all other groups of enterprises. In this case, we could not distinguish between the two compet- ing hypotheses, that is, that group membership had a favorable impact on the restructuring intensity and that BGs were acquiring enterprises which were more active in restructuring. This is the reason that the analysis was conducted only for the old group participants that merged before 2000. To test the hypothesis that the intensity of restructuring displayed by sub- sidiaries is higher than that of independent companies, we used the index of intensity of restructuring (INDRES). 5 This index is calculated as the total number of restructuring measures, including the successful introduction of essentially new products and services, the introduction of new produc- tion facilities, the increase of expenditures on marketing and advertising, the successful introduction of new technologies, successful certification according to international standards, significant capital investments, and an increase of R&D expenditures. 6 Presumably, the intensity of restructuring in nonregulated industries is influenced by company size, corporate governance organization, and mar- ket competition as well as by membership in BGs. In regulated industries, competition as such is restricted by the model of regulation, and, in many cases, it is completely impossible. This is the reason that the set of explana- tory variables is different for nonregulated and regulated industries: for both types of industries, the set includes attribution to subsidiaries merged before 2000, the GROAF1 variable, the company size COMSIZ variable measured by the logarithm of the number of employees, the property and management convergence indicator, MANSHA, which equals 1 if large owners participate in management of the firm and 0 otherwise, and variables for individual industries and types of settlement (capital city, regional center, town, urban settlement, or village). The comparison of the impact of BG membership and corporate governance organization on the scope of restructuring is con- nected with the problem raised in a previous chapter, namely, the reason for the widespread practice of the BG organizational form resorting to the separation of management from ownership in the Russian economy when it has been amply demonstrated that the opposite model, in which ownership converges with management, is much more advantageous. The investiga- tion also examines the advantages of BGs compensating for a more acute agency problem caused by the separation of property from management. In addition, the explanatory competition variables COMPRU and COMPFO are used for nonregulated industries. The COMPRU variable equals 1 if the enterprise experiences tough competition and 0 in all other cases. The COMPFO variable equals 1 if the enterprise experiences competition with suppliers from developed Western countries and 0 in other cases. The intro- duction of two different competition indicators is justified by previous 9780230_217287_11_cha09. dd 219 5/14/2009 11:06:15 AM 220 Organization and Development of Russian Business experience of an empirical analysis of Russian companies’ performance (Avdasheva et al. 2007). A positive response to the question of tough compe- tition with Russian manufacturers may not necessarily reflect competition intensity proper. The choice of this answer often reflects not the market competition but the low competitiveness of the enterprise in comparison with other domestic suppliers. At the same time, a positive response to the question about the existence of competition with foreign suppliers usually means that the company’s production is indeed involved in competition in the global market. This is the reason that a number of empirical studies have failed to reveal a favorable impact of competition with domestic suppliers on the intensity of Russian companies’ restructuring, in contrast to the case of competition with foreign manufacturers. Our survey has demonstrated that the impact of competition with domestic and foreign manufacturers on the behavior of enterprises, e.g., on the choice of the company organizational model, is not just different but clearly opposite (see Chapter 7 for details). Judging by the results of our survey and contrary to the existing opin- ion about a considerable decline in competition within the framework of Russian groups, subsidiaries experience as much competition as inde- pendent firms. Considering nonregulated industries alone, 7 every 20th enterprise among independent firms and subsidiaries experiences no com- petition with domestic or foreign suppliers; approximately one-quarter of the enterprises have to cope with tough competition with domestic and/or foreign suppliers; and the overwhelming majority of respondents evaluate the competition as moderate. 8 A number of surveys of Russian enterprises have confirmed the favorable, although not always monotonic, impact of competition on restructuring (see Avdasheva et al. 2007 for survey). In our case, the impact of competition may amplify the effect of the enterprises’ affiliation with BGs. Regression analysis denies the null hypothesis that the intensity of restruc- turing of group subsidiaries did not differ statistically from the intensity of restructuring of independent companies (Table 9.1). 9 This pattern is true for both regulated and nonregulated industries. As expected, for the reasons presented in Chapter 7, the convergence of ownership and management, which is demonstrated by the participation of large shareholders in com- pany management, has a statistically significant favorable impact on the intensity of restructuring only in nonregulated industries. Among the two competition indicators, it is competition with foreign manufacturers that has a statistically significant favorable impact on the intensity of restructur- ing in nonregulated industries. The impact of the industry in most regression specifications was statisti- cally significant. The impact of location is also significant with the expected sign: enterprises located in regional centers and the capital city took more restructuring measures in 2001–2004 than enterprises located in urban set- tlements and villages. In some specifications, enterprises located in towns 9780230_217287_11_cha09. dd 220 5/14/2009 11:06:15 AM Corporate Restructuring and Performance 221 also demonstrated advantages over companies located in urban settlements and villages. Therefore, hypothesis H1 is confirmed: group subsidiaries were more actively involved in restructuring in 2001–2004 than independent enter- prises. Participation in competition and access to additional financial and business resources within the framework of a BG has a favorable impact on the quantity of enterprise restructuring measures. Additional resources available to enterprises inside a BG, in turn, substitute the solution of the agency problem by the use of the do-it-yourself option. Impact of affiliation with a business group on financial and operative performance The second type of hypotheses tested in this chapter is that BG subsidiaries demonstrate better financial and operative performance indicators. The con- firmation of this hypothesis would lead to two important conclusions. First, Table 9.1 Impact of membership in business groups on restructuring activity Dependent variable INDRES (intensity of firm restructuring) Estimator Ordinal logit Ordinal logit Poisson Poisson Sample I a II a I a II a GROAF1 0.503** (3.873) 0.827* (2.900) 0.094** (3.956) 0.139* (2.925) COMSIZ 0.469*** (23.809) 0.465*** (7.573) 0.087*** (23.690) 0.058*** (8.391) MANSHA 0.503*** (7.527) 0.119 (0.048) 0.100*** (7.177) 0.048 (0.112) COMPRU 0.168 (0.815) —0.041 (1.232) — COMPFO 0.729*** (14.200) — 0.141*** (14.043) — INDDUM Yes Yes */*** Yes */*** Yes * CITDUM Yes */*** Yes */*** Yes */*** Yes */** N 480 86 480 86 Ϫ2Log likelihood 958.80 141.389 782.185 111.988 Pseudo R 2 0.154 0.435 — — Test of the model ␹ 2 70.736*** 42.004*** 41.838* 22.197* Notes: a Sample I: enterprises in nonregulated industries; Sample II: enterprises in regulated industries. Wald statistics (Wald Chi-square for Poisson model) are reported in parentheses. Only subsidiaries merged before 2000 are included. ***: significant at the 1% level, **: at the 5% level, *: at the 10% level. Source: Author’s estimation. 9780230_217287_11_cha09. dd 221 5/14/2009 11:06:15 AM 222 Organization and Development of Russian Business a wider program of subsidiary restructuring during the four previous years yields fruit. Second, we can once again confirm the assumption expressed in the previous chapter that better financial performance of group member enterprises may provide the basis for maintaining corporate discipline and preventing conflicts between ultimate owners and executive management. The common lack of reliability and distortion in financial data sug- gests that use of different financial and operational performance indica- tors would provide for greater accuracy. Survey results and annual reports together might be better sources of information. The first indicator is the response to the question about companies’ output increase during the four-year period preceding the survey. The INCOUT variable is based on responses from directors to the question about the change of output dur- ing the four years preceding the survey. The value of this variable is Ϫ1 if the enterprise reduced its output, 0 if the output has not changed, 1 if the output increased less then 50%, 3 if the output grew more than 50%, and 4 if the output more than doubled. The higher the INCOUT variable is, the more successful and competitive the enterprise is. The second indicator is the self-assessments of financial performance, both direct and in response to the question about the need to finance a shortfall in cash. The FINPER indicator reflects the sufficiency of cash inflows for the financing of current activity and equals 1 if the enterprise did not experience a serious shortfall in cash flow during 2001–2004 and 0 in other cases. The FINSELF indicator value ranges from Ϫ2 to 2 depending on respondents’ self-assessment of the company’s financial performance (including the responses bad/ likely bad/ satisfactory/ likely good/ good). The third indicator is the profitability (ratio of profit to sale) and returns on asset (ROA) indicators obtained on the basis of companies’ book reports from SKRIN and SPARK databases. 10 The AVEPRO and ROAAVE indicators represent the average profitability and returns on asset values in the period of 2002–2005. According to the assessments of company directors, the share of enter- prises that increased their output in 2001–2004 was higher among affiliated firms: 42% of subsidiaries more than doubled their output in comparison to 27% among autonomous enterprises. It is noteworthy that 40% of group members that increased their output simultaneously cut employment. A similar indicator for independent enterprises was less than 30%. Subsidiaries are not only stepping up output but also enhancing labor productivity. The superiority of subsidiaries in increasing output and simultaneously reducing employment is manifested both in the regulated and nonregulated indus- tries. An employment reduction with a simultaneous increase in output is slightly more frequent among enterprises merged before 2000 and, even more often, among those merged before 1995. Group members also dem- onstrate better financial performance and experience difficulties with the financing of their current activities less frequently (Figure 9.3). However, the advantages of subsidiaries can be explained by a favorable impact of 9780230_217287_11_cha09. dd 222 5/14/2009 11:06:15 AM Corporate Restructuring and Performance 223 the parent companies and by the industrial structure of the groups. It was reported in the previous chapter that the distribution of the group enter- prises gravitates, first, toward industries with higher profitability and, sec- ond, toward larger enterprises displaying better financial stability. This is the reason that the effect of membership in BGs should be distinguished from the effect of size and industry classification. Nevertheless, our regression analysis showed that this is not connected with the size and industry classification of the enterprises only (Table 9.2). In nonregulated industries, 11 participants in BGs displayed higher probabil- ity of output increase, better financial performance self-assessment, lower probability to encounter shortfalls in cash flows, and significantly higher profitability and ROA indicators. Besides group membership, significant fac- tors explaining all indicators were the enterprises’ industry classification and location. Enterprises located in the capital city, regional centers, and towns demonstrated better financial and operative performance than enterprises located in villages. Interestingly, although all group participants had better indicators, for example, higher financial performance self-assessment, this effect was higher and statistically more significant for old subsidiaries that had merged before 2000. At the same time, neither the competition char- acteristics that were measured by the COMPRU and COMPFO indicators nor corporate governance organizations represented by the indicator of large owner participation in management MANSHA had a noticeable impact on company financial performance results. Therefore, hypothesis H2 is also confirmed as true. The higher activity of enterprises in groups with better financial performance creates the image of Russian groups as quite normal companies and, at the same time, refutes the opinion that the development of connections between enterprises replaces corporate restructuring (Gaddy & Ickes 1998). Regardless of the 02040 % 60 80 100 0 20 40 % 60 80 100 Independent enterprises Parent companies Subsidiaries Independent enterprises Parent companies Subsidiaries Bad Likely bad Satisfatory Likely good Good Yes No Self-assessment of financial performance of the enterpriseat time of survey Serious shortfall in cash flow between 2001 and 2004 Figure 9.3 Financial performance of different types of enterprises Source: Author’s illustration based on survey data. 9780230_217287_11_cha09. dd 223 5/14/2009 11:06:15 AM Table 9.2 Impact of membership in business groups on performance indicators Performance indicator INCOUT INCOUT FINPER FINPER FINSELF AVEPRO ROAAVE Estimator Ordinal logit Ordinal logit Binary logistic Binary logistic Ordinal logit OLS OLS Sample I a II a I a I a I a III a III a Constant ——Ϫ1.538* (2.780) Ϫ2.096** (3.837) — Ϫ1.278 (0.481) Ϫ0.253 (Ϫ1.532) GROAFF — — 0.531*** (7.471) —0.394** (5.212) —— GROAF1 0.575*** (7.177) 0.579 (1.785) — 0.840*** (10.880) —3.095* (1.904) 0.231** (2.172) COMSIZ ——0.136 (2.293) 0.151 (2.116) 0.219*** (7.998) 0.003*** (18.736) INDDUM Yes * Yes* Yes Yes* Yes Yes*/*** Yes*/*** CITDUM Yes */*** Yes* Yes* Yes* Yes* Yes* Yes*/*** N 480 86 663 557 660 527 522 Ϫ2Log likelihood 119.899 89.132 747.755 617.379 1098.664 — R 2, b 0.041 0.138 0.083 0.090 0.066 0.433 0.016 Test of the model c 22.028*** 11.899* 39.160*** 35.550*** 37.984*** 29.712*** 1.653* Notes: Wald statistics are reported in parentheses for the models with INCOUT, FINPER, and FINSELF as the dependent variables. t-statistics – for the models with AVEPRO and ROAVVE. a Sample I: enterprises in non-regulated industries; Sample II: enterprises in regulated industries; Sample III: enterprises in both types of industries. b Pseudo R 2 is reported for the models with INCOUT, FINPER, and FINSELF as the dependent variable; Adjusted R 2 , for the models with AV E PRO and ROAAVE. c ␹ 2 for INCOUT, FINPER, and FINSELF; F-statistics for AVEPRO and ROAAVE. ***: significant at the 1% level, **: at the 5% level, *: at the 10% level. Source: Author’s estimation. 9780230_217287_11_cha09. dd 224 5/14/2009 11:06:16 AM [...]... upheaval and even before privatization and liberalization Acknowledgments The research was prepared with financial support of SU-HSE (individual academic grant of the Scientific Foundation No 06-01-0063 and funds from the Program of Fundamental Studies granted by the Ministry of Economic Development and Trade of the Russian Federation in 2007–2008) I am grateful to Naohito Abe, Tatiana Dolgopyatova,... Victoria Golikova, Satoshi Mizobata, Heiko Pleines, Fumikazu Sugiura, and Andrei Yakovlev as well as participants of the Joint Workshop of Japan Association of Comparative Economic Studies and the European Association of Comparative Economic Studies in Tokyo, Japan, in October 2007 I am particularly grateful to Ichiro Iwasaki, who made the greatest contributions toward improving this research Special thanks... telecommunications, is the SPARK database In addition to the industry and settlement-type variables characterizing the enterprise, the regression analysis was also based on the factor of retaining a state package of shares at the respondent enterprise The value of the OWNSTA variable is 1 if the stake of the state on the federal or local level in the company equity capital exceeds 10% and 0 in other cases Retaining... nonregulated and regulated industries The advantages of subsidiaries in nonregulated industries, above all, better financial performance, are much more vivid This is another confirmation of the assumption frequently expressed in Russian economic and business literature (Pappe 200 2a, 2002b), in which the comparative advantages of the group participants are a result of better entrepreneurial skills and better... allow a comparison of the TFP on the basis of the Cobb–Douglas production function in independent enterprises on the one hand and subsidiaries of BGs on the other The analysis is aimed at establishing the extent to which the advantages of subsidiaries, primarily, more stable financial performance and better financial indicators, are due to higher productivity On the other hand, a comparative analysis of. .. is based on the Cobb–Douglas production function evaluation Company proceeds are used as the output indicator, the average number of employed individuals (the LABOR variable), as the indicator of labor use, and the book value of fixed assets, CAPITA, as the indicator of capital use volume The source of data on employment and the value of fixed assets for subsidiaries in industries, which includes all...Corporate Restructuring and Performance 225 cause -and- effect relationship between corporate restructuring and financial performance (i.e., whether restructuring ensures an increase of profit or better financial performance allows for restructuring), both phenomena are observable in Russian BGs Impact of business integration on total factor productivity The data of enterprises’ annual balance sheets allow... such factors as institutional environment and the degree of maturity of the financial agents in the countries concerned A study of such behavior would better enable an understanding of the basic growth mechanism of an economy, and, in this chapter, we explore a Russian- style” from this viewpoint A thorough understanding of the rapidly growing Russian economy requires the consideration of both macro and. .. with alternative competition evaluations obtained within the frameworks of various sampling surveys of Russian enterprises (see Avdasheva et al 2007 for the survey) It should be reported that a favorable impact of business groups on corporate restructuring was established only for the index of the quantity of measures applied A favorable impact of business group membership on individual measures was... retaining a state-owned stake, usually in the form 9780230_217287_11_cha09 dd 225 5/14/2009 11:06:16 AM 226 Organization and Development of Russian Business of minority packages In the absence of a state stake, such enterprises are the prime target for takeover In addition to industry and enterprise location indicators, the TFP analysis relied on the classification of enterprises by their time of merger . Federation in 2007–2008). I am grateful to Naohito Abe, Tatiana Dolgopyatova, Victoria Golikova, Satoshi Mizobata, Heiko Pleines, Fumikazu Sugiura, and Andrei Yakovlev as well as participants of. indicators obtained on the basis of companies’ book reports from SKRIN and SPARK databases. 10 The AVEPRO and ROAAVE indicators represent the average profitability and returns on asset values in. Development of Russian Business experience of an empirical analysis of Russian companies’ performance (Avdasheva et al. 2007). A positive response to the question of tough compe- tition with Russian manufacturers