Chelyabinsk State University Transaction Costs of Corporations NIKOLAEVA E. V.
Plan of the Study: 1. Types of corporations 2. Features of large corporations in Russia 3. Features of small and middle-sized corporations in Russia 4. Transaction costs of corporations 5. Methods of transaction costs evaluation 6. Comparative analysis of transaction costs in large and middle-sized corporations in Russian industries
Types of Corporations Large corporation Middle-sized corporation Small corporation
The Features of Large Corporations in Russia Highly integrated businesses, widely utilize outsourcing, networks etc Turnovers exceed 1 000 000 RUR a year; Employees: over 500 - Hudge external transaction costs (bribes, penalties, kickbacks…) - High transaction costs of maintenance of corporative structure 4
Negative Effects of The Largest Transnational Corporations evasion of tax payment 2. violation of rules of commodity sale 3. environment destruction 4. speculative transactions 5. setting obstacles to sale in developing countries 6. dumping, etc. 1. 5
Features of Middle-Sized and Small Corporations Advantages: • ability to discern a long-term prospect, • a high level of responsibility and trust, • flexibility in decision-making, • least-effort principle «hidden champions» (by H. Simon) – middle-sized businesses: Features: narrow specialisation, concentration in a certain grocery niche, occupy upto 70 -80% of the market, turnover of upto 300 thousand dollars. 6
Problems of Russian Middle-Sized Corporations • insufficient support from the government; • disinterest of the government in such companies (as small taxpayers); • a lack of tax privileges; • high administrative barriers; • absence of highly qualified specialists. 7
Types of Transaction Costs Transaction costs - costs of institutional support of business Commercial costs: search for contractors, conclusion of contracts Cost of overcoming barriers (administrative and market) Internal non-production costs: management costs, coordination of firm departments
Methods of Transaction Costs Evaluation Integral indicator of transaction costs: • factual expenses: commercial, management and other operational expenditures • indirect indicators: the duration of a turnover of assets, a share of reserves in assets etc.
Comparative analysis of transaction costs in large and middle-sized corporations in Russian industries
Gas and Oil Industry 2 1. 8 1. 6 1. 4 1. 2 1 0. 8 0. 6 0. 4 0. 2 0 2004 2005 2006 2007 2008 2009 2010 2011 2012
Metallurgical Industry 2. 5 2 1. 5 1 0. 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012
Telecommunication 14 12 10 8 6 4 2 0 -2 2004 2005 2006 2007 2008 2009 2010 2011 2012
Comparative Analyses of Industries 6 5 4 3 2 1 0 2004 2005 2006 2007 2008 2009 2010 2011 2012
TC Level in Food Industry
Profitability in Food Industry
Conclusion 1. The type of ownership and the size of a company play an important role in the formation of the structure of expenses, which further determines the size of profit. 2. In companies, where property and supervision are not separated, the existence of market competition stimulates managing directors to economize on expenses. 3. In public corporations there is a lack of motivation of managers to decrease costs and besides such corporations have to bare considerable burden of transaction costs in their illegal action.
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