Skip to main content

Capital structure and oligarch ownership


This study examines the effects of oligarch ownership on corporate capital structures. Using panel data from Ukraine, I find that oligarch–owned companies employ significantly more debt and liabilities than their peers. However, there is no direct relation between oligarch ownership and target capital structure. Whereas the determinants of target leverage are similar across all owners, differences in firm characteristics also have a fairly small effect. I show that larger leverage is due to better access to debt, which results in lower rebalancing costs and faster restructurings of oligarch–owned companies. The findings clearly suggest that oligarchs benefit from the accumulated advantages.

This is a preview of subscription content, access via your institution.

Fig. 1


  1. The term “oligarch” denotes a post-Soviet industrial and/or financial magnate (usually Russian or Ukrainian) who “controls sufficient resources to influence national politics” (Guriev and Rachinsky 2005).

  2. Two main focuses of capital structure studies include the determinants of capital structure choice (e.g., Rajan and Zingales 1995; Jõeveer 2013) and testing of the particular theories, such as static trade-off, dynamic trade-off, pecking order, agency theory, or market timing model.

  3. “For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them”—The Bible (New International Version), Matthew 25:29.

  4. See KyivPost, “Government nationalizes PrivatBank, guarantees deposits” (Dec. 18, 2016) and BBC, “Ukraine’s biggest lender PrivatBank nationalised” (Dec. 19, 2016).

  5. Stock Market Infrastructure Development Agency of Ukraine database,

  6. The first-ever ranking was published by Korrespondent in 2006. Focus launched its rating in 2007, whereas Forbes (Ukraine) published its first ranking in 2011. Several available rankings include fewer or greater than 100 persons.

  7. Industries are classified according to international standard industrial classification of all economic activities (Rev.4). See industry composition of the dataset in Appendix 1.

  8. As mentioned earlier, firm selection during the privatization was not random. Nevertheless, it is not clear to what extent differences between oligarch and non-oligarch firms come from non-random selection of ownership.


  • Baum CF, Caglayan M, Schäfer D, Talavera O (2008) Political patronage in Ukrainian banking. Econ Transit 16(3):537–557

    Article  Google Scholar 

  • Booth L, Aivazian V, Demirguc-Kunt A, Maksimovic V (2001) Capital structures in developing countries. J Finance 56(1):87–130

    Article  Google Scholar 

  • Chang SJ, Hong J (2000) Economic performance of group-affiliated companies in Korea: intragroup resource sharing and internal business transactions. Acad Manag J 43(3):429–448

    Google Scholar 

  • Charumilind C, Kali R, Wiwattanakantang Y (2006) Connected lending: Thailand before the financial crisis. J Bus 79(1):181–218

    Article  Google Scholar 

  • De Haas R, Peeters M (2006) The dynamic adjustment towards target capital structures of firms in transition economies. Econ Transit 14(1):133–169

    Article  Google Scholar 

  • Dinç IS (2005) Politicians and banks: political influences on government-owned banks in emerging markets. J Financ Econ 77(2):453–479

    Article  Google Scholar 

  • Driffield N, Mahambare V, Pal S (2007) How does ownership structure affect capital structure and firm value? Recent evidence from East Asia. Econ Transit 15(3):535–573

    Article  Google Scholar 

  • Ebrahim MS, Girma S, Shah ME, Williams J (2014) Dynamic capital structure and political patronage: the case of Malaysia. Int Rev Financ Anal 31:117–128

    Article  Google Scholar 

  • Faccio M (2006) Politically connected firms. Am Econ Rev 96(1):369–386

    Article  Google Scholar 

  • Faccio M, Masulis RW, Mcconnell JJ (2006) Political connections and corporate bailouts. J Finance 61(6):2597–2635

    Article  Google Scholar 

  • Fama EF, French KR (2002) Testing trade-off and pecking order predictions about dividends and debt. Rev Financ Stud 15(1):1–33

    Article  Google Scholar 

  • Fisman R (2001) Estimating the value of political connections. Am Econ Rev 91(4):1095–1102

    Article  Google Scholar 

  • Flannery MJ, Rangan KP (2006) Partial adjustment toward target capital structures. J Financ Econ 79(3):469–506

    Article  Google Scholar 

  • Fraser DR, Zhang H, Derashid C (2006) Capital structure and political patronage: the case of Malaysia. J Bank Finance 30(4):1291–1308

    Article  Google Scholar 

  • Gokhberg L, Roud V (2016) Structural changes in the national innovation system: longitudinal study of innovation modes in the Russian industry. Econ Change Restruct 49(2):269–288

    Article  Google Scholar 

  • Gorodnichenko Y, Grygorenko Y (2008) Are oligarchs productive? Theory and evidence. J Comp Econ 36(1):17–42

    Article  Google Scholar 

  • Guriev S, Rachinsky A (2005) The role of oligarchs in Russian capitalism. J Econ Perspect 19(1):131–150

    Article  Google Scholar 

  • Ivashkovskaya IV, Solntseva MS (2007) The capital structure of Russian companies: testing trade-off theory versus pecking order theory. J Corp Finance Res 1(2):17–31

    Google Scholar 

  • Jensen MC (1986) Agency costs of free cash flow, corporate finance, and takeovers. Am Econ Rev 76(2):323–329

    Google Scholar 

  • Jensen MC, Meckling WH (1976) Theory of the firm: managerial behavior, agency costs and ownership structure. J Financ Econ 3(4):305–360

    Article  Google Scholar 

  • Jõeveer K (2013) Firm, country and macroeconomic determinants of capital structure: evidence from transition economies. J Comp Econ 41(1):294–308

    Article  Google Scholar 

  • Khwaja AI, Mian A (2005) Do lenders favor politically connected firms? Rent provision in an emerging financial market. Q J Econ 120(4):1371–1411

    Article  Google Scholar 

  • Manos R, Murinde V, Green CJ (2007) Leverage and business groups: evidence from Indian firms. J Econ Bus 59(5):443–465

    Article  Google Scholar 

  • Maury B, Liljeblom E (2009) Oligarchs, political regime changes, and firm valuation. Econ Transit 17(3):411–438

    Article  Google Scholar 

  • Myers SC (1977) Determinants of corporate borrowing. J Financ Econ 5(2):147–175

    Article  Google Scholar 

  • Nivorozhkin E (2004) The dynamics of capital structure in transition economies. Econ Plan 37(1):25–45

    Article  Google Scholar 

  • Nivorozhkin E (2005) Financing choices of firms in EU accession countries. Emerg Mark Rev 6(2):138–169

    Article  Google Scholar 

  • Pöyry S, Maury B (2010) Influential ownership and capital structure. Manag Decis Econ 31(5):311–324

    Google Scholar 

  • Rajan RG, Zingales L (1995) What do we know about capital structure—some evidence from international data. J Finance 50(5):1421–1460

    Article  Google Scholar 

  • Saeed A, Belghitar Y, Clark E (2015) Political connections and leverage: firm-level evidence from Pakistan. Manag Decis Econ 36(6):364–383

    Article  Google Scholar 

  • Saeed A, Belghitar Y, Clark E (2017) Political connections and firm operational efficiencies: evidence from a developing country. Rev Manag Sci 11(1):191–224

    Article  Google Scholar 

  • Stephan A, Talavera O, Tsapin A (2011) Corporate debt maturity choice in emerging financial markets. Q Rev Econ Finance 51(2):141–151

    Article  Google Scholar 

  • Strebulaev IA (2007) Do tests of capital structure theory mean what they say? J Finance 62(4):1747–1787

    Article  Google Scholar 

  • Welch I (2011) Two common problems in capital structure research: the financial-debt-to-asset ratio and issuing activity versus leverage changes. Int Rev Finance 11(1):1–17

    Article  Google Scholar 

Download references


I thank two anonymous referees for valuable comments and suggestions. All remaining errors are mine.

Author information

Authors and Affiliations


Corresponding author

Correspondence to Demid Chernenko.


Appendix 1. Detailed dataset statistics

See Tables 6, 7 and 8.

Table 6 Industry structure of the dataset
Table 7 Time structure of the dataset
Table 8 Descriptive statistics of variables

Appendix 2. Robustness checks

This appendix discloses the following robustness checks (see text for the further details):

See Tables 9, 10, 11, 12, 13, 14, 15 and 16.

Table 9 Alternative specifications (main sample)
Table 10 Static model (main sample)
Table 11 Static model (ownership sub-samples)
Table 12 Instrumental variables regressions (main sample)
Table 13 Instrumental variables regressions (ownership sub-samples)
Table 14 Regressions with outliers (main sample)
Table 15 Regressions with outliers (ownership sub-samples)
Table 16 Regressions using the trimmed dependent variable

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Chernenko, D. Capital structure and oligarch ownership. Econ Change Restruct 52, 383–411 (2019).

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI:


  • Capital structure
  • Leverage
  • Oligarchs
  • Influential ownership
  • Connected firms
  • Cumulative advantage

JEL Classification

  • G32
  • P31