economy the role of banks

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economy the role of banks

  1. 1. CENTRAL EUROPEAN UNIVERSITY DEPARTMENT OF ECONOMICS MONEY, BANKING AND FINANCE Feasibility of the German-type model of Universal Banks in the Post-Communist Economies. The Case of Russia Professor: Jacek Rostowski Prepared by: Asenka Asenova MA in Economics, 1styear ID# 161801 Spring Semester, 2006, Budapest
  2. 2. Pages of Contents Introduction I. The German-type model of universal banks 1. Key characteristics 2. The German model and economic growth II. Feasibility of the German model in the post-communist economies in the early years of transition III. Feasibility of the German model in the later stages of transition IV. The case of Russia 1. General overview of the Russian banking sector 2. Empirical evidence for the bank-enterprise relationships Conclusions Appendices List Appendix no 1: Indices of real credit and real GDP in Russia, 1992-1995 Appendix no 2: Credit and non-performing loans in the Russian banking sector, 1992-1997 2
  3. 3. Abstract This paper examines the feasibility and desirability of the German-type model of universal banks for the achievement of sustainable economic growth in the post-communist economies. This issue is addressed taking into consideration the economic conditions in the countries in transition in the early and medium stages of reforms. The paper also presents empirical evidence from the evolution of the banking system in Russia in the early to mid- 1990s from the viewpoint of the relationship between banks and industry. The main conclusion drawn is that the applicability of the German-type model requires the presence of certain conditions that were at large not established in Russia; hence, the banking system had a rather contradictory effect on investment and economic growth. Introduction Banks are essential for each country’s economy, since no growth can be achieved unless savings are efficiently channeled into investment. In this respect, the lack of a full-fledged banking system has often been identified as a major weakness of the centrally planned economies. Therefore, reforming the banking sector in the former communist countries and creating a new culture of trust and confidence has been a crucial task in the process of transition to a market economy. Because of the vital importance of the banking reforms in the post-communist economies, a considerable amount of literature has focused on the issue of designing an optimal financial system as a critical element of structural reforms. Undoubtedly, the fact that establishment of a German-type model of universal banks in the former communist countries from Central and Eastern Europe has occurred is probably proof that it was the most desirable outcome, and moreover, an outcome that complies with the ‘spirit of the European financial institutions’ (Grosfeld, 1994). However, in this paper I shall examine the feasibility and desirability of the German-type model in the transition countries in the early and intermediate stages of transition for the accomplishment of sustainable economic growth. In analyzing this issue I will provide empirical evidence from the evolution of the banking system in Russia in the period between 1991-1995 from the viewpoint of the relationship between enterprises and banks, and the impact of these relationships on investment and economic growth. 3
  4. 4. I. The German-type model of universal banks 1. Key characteristics Following Grosfeld (1994) I shall use a distinction of three major functions performed by the financial institutions, while characterizing the main features of the German-type model of universal banks, namely: financing, information and control. Financing is defined by the author as creating channels to transform savings into investment; the information aspect here is analyzed from the viewpoint of generation of information on the value of the firms and on different investment opportunities. Finally, control, is viewed as imposing monitoring on the corporate management. A major distinction of the German-type financial system is the dominance of a relatively small number of banks (the ‘big three’ or ‘big four’ largest banks), involved in both commercial and investment banking and, maintaining close relationships with the industry. German-type banks provide a wide range of financial services but the element of key importance is the accent on long-term money lending to enterprises. On the information part, little information on the value of securities is made publicly available; instead, banks have a rather privileged access to it through the established close links with the industries (Grosfeld, 1994). Lastly, with respect to corporate control, the German-type model has as a main feature high concentration of ownership, i.e. companies own substantial stakes of each other. As expected in this situation, banks have both the incentives and the ability to take active participation in shaping the major decisions of the enterprises. The last means that banks are in a position to also influence the investment decisions of non-financial companies. Hostile takeovers and leveraged buy-outs are rare in the German-type model. In short, the German-type model of universal banks has as a core element the ‘close participation in the ownership and control on non-financial firms’ (Rostowski, 1998, p. 320). The impact of this particular system on economic growth has been a source of numerous arguments and the next section will present some of these views. 4
  5. 5. 2. The German model and economic growth Many authors have eloquently supported the idea of German-type banks. According to Mayer, for example, ‘the distinctive feature of successful financial systems is their close involvement in industry’ (Mayer, 1988). Additionally, Gerschenkron (1968) argues that in the middle of the nineteenth century universal banks in Germany – a combination of commercial and investment banks – strongly contributed to the industrialization of the economy serving as a substitute for the insufficiency of wealth and entrepreneurial expertise (Gerschenkron through Rostowski, 1998). A similar case regarding provision of funds available for investment, has received large support by several authors claiming that a bank’s stake in an enterprise would prevent banks from behaving too cautiously when providing credit through allowing them to reap some benefits from financing riskier projects (see e.g. Dewatripond and Tirole, 1991). Another, mostly theoretical, argument in support of the idea of German-type banks rests on the concept that banks would help reduce the existing moral hazard problem between providers of finance, managers and employees via the creation of long-term commitment. The first, and probably most obvious, counterargument questions the very idea of Gerschenkron for the universality of the German model, claiming that no particular kind of system by itself could do well in explaining economic growth. One possible reason for this is the fact that there are too many other factors, such as macroeconomic policy and legal framework that play a considerable role for realization of growth. Empirical evidence shows that Austria, for instance, had the same banking structure as Germany but banks had a completely different behavour: they preferred to provide credits to well-established profitable firms, avoiding both risky work out of long-term plans and providing entrepreneurial expertise (Cameron, 1972). More importantly, some authors provide arguments against the introduction of the German model, since banks as large investors might be too soft because they fail to terminate unprofitable projects they have invested in (Gertner, Scharfstein & Stein, 1994). Naturally, the process of transition from centrally planned to market economy in the post- communist countries has given rise for new arguments in favour and against the German- 5
  6. 6. type banking system. A significant number of economists have been favouring the idea of implementing a German model with strong universal banks in the former communist countries as being the best suitable solution with respect to the needs of these economies. Moreover, they argue that it is exactly this type of system that emerges in these economies, including the particular case of Russia (see eg. Belyanova, Rozinsky, 1995). The main point of introducing such a model in the post communist countries is that universal banks could mobilize a considerable amount of savings and make them available as capital for investment in strategic projects of the firms, as well as impose a better corporate control structure on the firms; thus, they might play the role of an instrument thought which the economy would catch up with the advanced market economies. However, most authors, who believe in the potential of the German model to boost investment and economic growth in the post- communist economies, often underline that fact that this mechanism is only possible if banks hold concentrated equity of their debtor clients (see e.g. Gorton and Schmid, 1994). This can be regarded as an important precondition for the introduction of this model, together will all other conditions that will be discussed further on. Another argument supporting the bank-based system in general relies on the idea that the development of efficient security markets on average takes much longer time as compared to the time period needed for the establishment of a stable banking system. (e.g. Popov, 1999). At the same time, however, another body of literature gives rise to various counterarguments claiming that the initial conditions in the transition economies provided little scope to develop banking systems of German type, at least for the early years of transition (Rostowski, 1998). Hence, the main question raised is whether banks in the post-communist countries could play the role of universal banks of German type, taking into consideration the specific conditions in these economies. This issue will be addressed in the next section of the paper from the viewpoint of the situation in transition economies in the early stages of transition and its later evolution. 6
  7. 7. II. Feasibility of the German model in the post-communist economies in the early years of transition A key feature of the post-communist economies in the early years of transition was the exceptionally strong degree of uncertainty due to fundamental macroeconomic changes taking place (e.g. trade and price liberalization), as well as to high indebtedness of the state- owned enterprises. At the same time, the new state-owned commercial banks, separated from the Central bank, were flawed with a major weakness: lack of adequate banking skills. These two factors taken together, led to significant money loss from short-term lending in most transition economies. And, although, it is namely the long-term money lending which is supposed to ensure support for the introduction of the German-type system, paradoxically it provides a strong argument against the German model, for had the banks been involved in long-term money lending the scale of the losses incurred would have been even greater (Rostowski, 1998). Moreover, short-term lending would allow the banks to acquire some expertise in dealing with short-term debt – a precondition to develop skills for medium and long-term money lending; the later being an absolutely necessary condition for the feasibility of the German model. Another point closely related to the feasibility of the German model in the early years of transition concerns the ownership structure of the post-communist economies. Due to the different pace of the reforms in the different macroeconomic sectors, the situation in most transition economies was such that privatization of the state-owned enterprises was done prior to privatization in the banking sector. At the same time, as already mentioned, first and perhaps most noticeable characteristic of the German-type banks is their ‘close participation in the ownership and control on non-financial firms’ (Rostowski, 1998). Consequently, introduction of the German model in a situation where banks remain state-owned and a great deal of enterprises has already been privatized would imply re-nationalization of the economy – result neither politically, nor economically desirable (Rostowski, 1998). An argument very much linked to the ownership structure is also proposed by Grosfeld (1994): on the one hand, a key feature of the German system is that little information on the enterprise value is publicly available, while banks have a privileged access to information on 7
  8. 8. the firms’ value and liabilities; on the other hand, it is crucially important for the restructuring of the former centrally planned economies, aiming at starting an efficient allocation of resources, to generate adequate information on various investment opportunities and strategies. Based on this contradiction, Grosfeld argues that if chosen in the early process of economic transformation, the German model may hinder, rather than facilitate, the quality of the much needed restructuring process. One last counterargument for the introduction of the German model concerns the major aim of the banking reforms in the post-communist economies, i.e. that banks switch from providing ‘systematically bad’ to providing ‘systematically good’ loans (Rostowski, 1998). Thus, the German model creates a risk that banks in the post-communist countries would become a crossing point of various interests: governmental, political or these of large financial-industrial groups (as in the case of Russia), which might harm the process of their transformation into efficient institutions. All the abovementioned arguments provide enough grounds to conclude that the German model of universal banks is neither desirable, nor feasible in the early years of transition to market economy characterized by state ownership and poor banking skills. Thus, in the next section I shall further the applicability of the German system in the post-communist economies in the later stages of transition. III. Feasibility of the German model in the later stages of transition What characterizes the later stage of the transition process is that banks have already developed certain skills for medium and long-term lending; enterprises have started a more efficient allocation of resources and some output growth has been achieved. The later also implies growing enterprise demands for investment capital. The relevance of the German model for the transition economies in these conditions would depend on various considerations; for instance, one such consideration, is that in this particular situation the German model would provide cheaper sources of long-term funds to 8
  9. 9. firms at the cost of more expensive external equity (Steinherr, Huveneers, 1992), as well as that it provides cheaper capital in general. Of all such factors I will discuss two in more details because of their key importance. These are the implemented method of privatization and the inflationary history of the country. The role of privatization method for the development of a certain type of banking system in the post-communist economies could be seen in at least two directions. On the one hand, introduction of a particular bank model might be favoured taking into consideration its potential effects on the speed and quality of the privatization process; in this respect some authors argue that banks of universal type lower the incentives to privatize since they are unwilling to give up their special relationships with the SOE sector (Grosfeld, 1994). Hence, the German-type model would slow down the speed of privatization, although it would possibly increase its quality as ‘flotations would become harder’ (Rostowski, 1998). At the same time, it has been argued that the type of banking model that emerged in the transition economies was not a matter of a conscious choice of policy makers but could be seen as a result of a number of factors, among which the chosen privatization method together with the ownership concentration (Popov, 1999). In this respect, mass-privatization scheme, creating a huge number of shareholders and implying widely dispersed ownership, would facilitate the development of security markets and, thus, an Anglo-Saxon type of banking system1. Conversely, direct sale of assets (via auctions or tenders) is much less favourable for the development of the security markets; it creates a concentrated ownership and hence, would facilitate emergence of banking systems of a German-type. One such possible example is Poland, where voucher privatization has been rather modest, and banks were given incentives to take equity in holding of firms. Another factor of crucial importance that shaped the type of the emerging banking system in the post-communist economies is the inflation history of the countries (Rostowski, 1998). The role of the inflation record could be sought in the following direction: high inflation 1 It is arguable whether this theoretical argument worked well in practice. One counterexample is the voucher privatization scheme implemented in the Czech Republic, which created a huge number of owners and dispersed ownership and, indeed, boosted the development of the stock market. However, through the stock market ownership was later on re-concentrated; moreover, big bulks of shares ended up in the hands of bank- managed financial investors. 9
  10. 10. implies high volatility of the nominal interest rates, which, in turn, leads to an increased risk to both creditors and debtors (regardless of the fact whether contacts are based on fixed or non-fixed interest rates). In this situation, choice of a variable nominal interest rate would mean a high depreciation of loans, while at the same time a fixed one would imply extremely high volatility of the real interest rate. In consequence, one can conclude that in these circumstances both suppliers and demanders of capital can protect themselves from interest rate volatility by using equity rather than debt. Hence, these initial conditions provide a strong case in favor of a model of close bank-enterprise relationships. In the particular case of the post-communist economies a good proxy for the feasibility of the German-type model of banking system is the ratio of bank credit to non-government sector to GDP (Rostowski, 1998). As expected, in countries with higher inflation the general public would minimize holdings of domestic currency, which in turn, would mean a collapse of real credit available in the economy. This factor, among others, leads to the conclusion that countries with low credit to non-government sector/GDP ratios cannot adopt the German model of banking system simply because the amount of credit available to the banking system would be far from sufficient in order to respond to the enterprises’ capital needs. All these considerations provide a logical answer to the first main question of the paper: even in the later stages of transition the German-type model of banks is not feasible for most of the countries; in fact, the only countries for which the German type universal banking system was applicable in the intermediate transition stage were the Czech Republic, Hungary and Slovakia (Rostowski, 1998). But this does not answer the question about the situation in Russia, which has quite often proved to be the exception of the rule. In the next section I will focus on the pattern of banking sector development in Russia and the bank-enterprise relationships in the first half of the 1990s, as well as on the impact of the particular banking structure that emerged in the country on investment financing. IV. The case of Russia 10
  11. 11. 1. General overview of the Russian banking sector Russia started reforms in the banking sector at the end of the 1980s with the establishment of a two-tier banking system, composed of the Central bank responsible for carrying out the monetary policy, and five large state-owned specialized banks dealing with deposit collecting and money lending. Most authors argue that by the end of the 1990s three major types of banks developed in Russia: joint-venture banks, domestic commercial banks, and the so- named ‘zero’ or ‘wildcat’ banks. The last were formed by their shareholders - in most cases groups of public institutions and/or industrial firms (the so called Financial Industrial Groups (FIGs) - with the major purpose to finance their own non-financial businesses. As a result of the low capital requirements and practically nonexistent bank regulation, the number of these new banks grew rapidly and as early as January 1, 1996, Russia had 2,598 banks2, of which the great majority (in number) was constituted of the ‘zero’ banks. The banking system adopted a German-type structure with banks being allowed to hold substantial stakes in non-financial firms. At the same time, through cross-shareholdings the Russian firms literally owned the banks they borrowed from, thus ‘giving new meaning to the concept of ‘insider’ lending’ 3(Bernstam and Rabushka, 1998). Such lending practices worked well because the government underwrote the implicit debt created by enterprise banks making risky loans to themselves. In addition to this, in the early reform stage the government-directed credits dominated money lending; thus, the banks’ main function was to borrow money from the Central Bank of Russia (CBR) at subsidized rates and then channel the finances to designated enterprises, the last being in most cases the de facto owners of the banks. The overall effect of this situation was, regarding the enterprise sector, that many new enterprises were left out with extremely limited access to funds, and, concerning the bank sector, it implied high risk exposures as banks were subject to risk both as creditors to the industries and as shareholders in them. Moreover, there was an added source of risk to banks 2 Source: Central Bank of Russia, http://www.cbr.ru 3 One may argue that the banks’ holding in non-financial firms in Russia were not concentrated enough; rather it was the case that firms owned outright the banks they borrowed from. This is one of the reasons why some authors raise the question whether the system adopted was of a German-type at all (see e.g. Popov, 1999). I shall briefly discuss this argument later on. 11
  12. 12. since, at least theoretically, the banks bear the risk of government-directed credit to enterprises. In addition, the macroeconomic situation in the early 1990s was characterized by extremely high inflation rates and thus, negative interest rates (e.g. in 1992-1993 the real interest rates were -93%; in 1994 through early 1995 -40% before finally turning positive for time deposits during the second half of 19954). As a result, the amount of total credit to enterprises dramatically dropped during this period; in 1991 the share of credits to enterprises comprised 31% of GDP, while in 1995 the banking system had a book value of loans to enterprises of $26 billion, representing 8.1% of GDP (see Appendix no 1). All these factors taken together led to a rapid growth of overdue credit: as shown in Appendix no 2 by the end of 1995 one third of the total bank loans were non-performing, a share amounting to almost 3% of GDP. Equally important, long-term credits amounted to around 5% of total bank loans; in other words, banks focused mainly on short-term money lending (which, taking into consideration the high level of uncertainty had a relative advantage as compared to long term money lending). The above described characteristics of the Russian banking sector in the first half of the 1990s highlight the difficult macroeconomic situation in which a German-like model of universal banks was introduced. And even in this initial stage, one has enough grounds to question the feasibility of this decision, for instead of a clear inflation history – an absolutely necessary pre-condition for the introduction of a German-type banking system, Russia had experienced extremely high, persistent inflation rates and a great macroeconomic instability. Moreover, some authors argue that banks shareholding in non-financial firms was rare (see e.g. Popov, 1999) thus, it did not reach a sufficient level of concentration that would allow the mechanism proposed by Gerschenkron to work. Introducing a German-type of banking system in Russia, therefore, seems not to be an outcome of a well-thought strategy by the policy makers, but unfortunately, as seen by most observers, a result of regulatory capture by some influential private interests. 4 Source: Central Bank of Russia, http://www.cbr.ru 12
  13. 13. Still, many authors claim that given Russia’s background, the chosen system of close bank- enterprise relationships was optimal and that banks played a major role in facilitating investment (Perotti, Gelfer, 1998). In this respect, the next section of the paper will focus on providing empirical evidence on the bank-enterprise relationships in Russia and on assessing the relevance of the chosen bank model for Russia’s economy in the early transition stage. In particular, two major questions will be raised: 1) how did the close bank-enterprise relationship affect (if at all) the distribution of bank credit and the decisions of the enterprises; and most importantly, 2) did this model play the role of an instrument to boost firms’ investment as believed by Gerschenkron. 2. Empirical evidence for the bank-enterprise relationships As already mentioned, due to various factors the Russian banking system experienced extremely high levels of bad credits – a situation not distinctive for Russia but rather common for most transition economies. In such circumstances, one of the most important bank’s right as a creditor, is the right to repossess collateral in case of a debtor’s failure to repay. However, a study on Russia’s banking sector executed by Fan, Lee and Schaffer (1996) provides surprising results in this regard: no matter that in principle, most bank loans in Russia are short-term and collateralized, in practice, regardless of the huge number of cases when firms fail to duly serve the credits, banks have taken no actions towards repossession of collateral; instead, a regular practice is capitalization of interest and rescheduling of the principal. These findings provide strong evidence that Russian banks are too soft in their dealings with enterprises, thus giving rise to a severe moral hazard problem for even a healthy bank that is able to duly serve its debt would have incentives to deviate. One possible explanation for the softness of the banking system comes from the fact that banks are large investors in the industries they finance, i.e. that it is the implementation of a model with tied bank-enterprise relations that is to be held responsible for the problem. In order to further investigate the issue Fan et al. examine the bank-enterprise relationships and the impact of these relationships on credit provision. Somewhat surprisingly, the authors find 13
  14. 14. no evidence that a bank shareholding in an enterprise translates to an easier access to credit, neither do the results imply that enterprise ownership in the bank significantly affects the easiness of obtaining a bank loan. Thus, they conclude, the results suggest the presence of adverse selection in the Russian credit market, i.e. the problem comes from the fact that many badly-performing firms are borrowers. Another direction of thought, suggests that it is possible that bank-enterprise links are such that banks’ rights regarding Russian industrial firms are much more protected in their capacity as shareholders rather than as creditors. Findings of Fan et al. with respect to this hypothesis suggest that banks’ shareholding in enterprises is a good indicator of bank influence on enterprise decisions as significantly higher fraction of enterprises with some bank shareholding indicates the shareholding bank influences their decisions (especially with respect to financial matters), as compared to enterprises with no equity shareholding by banks. Thus, evidence confirms the notion that, in general, banks as creditors have much too little influence on enterprises; however, they do have a strong impact on the financial decisions of firms they own shares in. Regarding the second question of interest, I will first focus on the empirical work of Perotti and Gelfer (1998), who study the role Russian FIGs play for firms’ corporate governance and investment. Comparing firms members of the Russian FIGs and/or owned by banks on the one hand, and a control group of independent firms on the other, the authors find evidence that investment is sensitive to internal liquidity (measured as cash flow) for the second type of firms, while the group-firms are less dependant on internal funds to finance investment expenditures. The possible interpretation of this finding could be sought in two directions: one feasible view suggests that FIG firms do a better reallocation of resources within the group through their internal capital markets in order to finance profitable projects; alternatively, one may argue that rather than providing entrepreneurial expertise and capital, FIGs reallocate finances among the member-enterprises in order to serve private benefits of the controlling shareholders, in other words, well-performing, profitable enterprises are used as ‘cash cows’. 14
  15. 15. In order to test these opposing hypotheses, Perotti and Gelfer compare the quality of investment in FIGs and bank-owned firms and individual firms via using a basic regression of individual firms’ investment on a proxy for Tobin’s Q (Q being a sufficient a sufficient statistic for investment). Furthermore, following Johnson (1997) the authors distinguish between bank-led groups and industry-centered groups in view of their structural differences, and presumably the different type of behavour of these groups. The results confirm the high degree of redistribution of financial resources among the group, but at the same time the authors still interpret them more as a proof the positive role played by the bank-led Financial- Industry Groups in terms of influencing the quality of investment (since investment decision is much more driven by the expected profitability of investment and not that much by the availability of internal funds), while they refrain from giving a definitive answer about the extent to which redistribution was driven by private benefits. Hence, the empirical evidence provides no clear view on the role played by the bank- and industry-based groups in Russia; still, most economists continue to believe that in the end, the banking structure in Russia allowed banks to simply redistribute financial resources: from the CBR to favored industries, as well as, within the groups from one firm to another, this way serving mostly private benefits (see e.g. Perotti, 1998). Of course, there is no doubt that these groups to a certain extent facilitated investment and provided corporate governance, thereby playing an important role in Russia’s economic development, but this role was rather controversial. Moreover, the difficulty in assessing the true role played by the close bank- enterprise links based on the empirical evidence provided comes especially from the fact that the German-type model of universal banks did not bring observable economic improvement of the Russian economic performance, neither did it lead to any improvement in the living standard. 15
  16. 16. Conclusions The main conclusion that could be derived from this study is that the applicability of the German-type model of universal banks crucially depends on the presence of certain pre- conditions, probably the most import of which are macroeconomic stability and low inflation rates. It also calls for policy makers to carefully analyze all the possible impacts of the introduction of such a model in important aspects of the reforms like privatization and enterprise restructuring. And, while most transition countries started their banking sector restructuring rather cautiously via introducing numerous restrictive bank regulations and gradual liberalization, Russia literally ‘jumped’ into universal-type of banking system. Moreover, this happened in a situation characterized by extremely high levels of inflation and macroeconomic instability. Introducing a German-type of banking system in a situation which implied infeasibility of this model had considerable implications both for the banking systems and the enterprise sector, leading to rather contradictory results in terms of investment and growth. The introduction of the German model in the post-communist economies before the establishment of all the necessary conditions can, therefore, be summarized using the words of Enrico Perotti to characterise Russia’s banking sector as an ‘[…] attempt to leapfrog the intermediate stages of financial development […]’. 16
  17. 17. References Bernstam, M., Rabushka, A., 1998, ‘The Nonmonetary System and the Ersatz Banking System in Russia: 1991–1995’ in ‘Fixing Russia's Banks: A Proposal to Growth’, Chapter 2, Hoover Institution Press Cameron, R., 1972, ‘Banking and Economic Development’, New York, London: Oxford University Press Fan, Q., Lee, U. and Schaffer, M., 1996, ‘Firms, Banks and Credit in Russia’ in ‘Enterprise Restructuring and Economic Policy in Russia’, eds. Commander, S., Fan, Q. and Schaffer, M., The World Bank Grosfeld, I., 1994, ‘Comparing Financial Systems: Problems of Information and Control in Economies in Transition’, CASE Research Foundation, Warsaw Mayer, C., ‘New Issues in Corporate Finance’, European Economic Review, 1988 Perotti, E. and Gelfer, S., 1998, ‘Investment Financing in Russian Financial-Industrial Groups’, CASE-CEU Working Papers Series Perotti, E., ‘CEPR Policy Paper 9: Lessons from the Russian Meltdown: The Economics of Soft Legal Constraints’, 1998 Popov, V., 1999, ‘The Financial System in Russia Compared to Other Transition Economies: The Anglo-American versus the German-Japanese Model’, Comparative Economic Studies Rostowski, J., 1998, ‘Universal Banking and Economic Growth in Post-Communist Economies’ in ‘Macroeconomic Instability in Post-Communist Countries’, Chapter 13, Oxford University Press Central Bank of Russia, http://www.cbr.ru 17

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