The Wedge between Ownership and Control, Shareholder Identity and Corporate Disclosure: Evidence from Russia

The paper explores a dual-class stock setting to examine the effect of separation of ownership and control on corporate disclosure. Our analysis is based on a unique panel dataset of publicly traded firms in Russia, where dual-class stock companies emerged exogenously during the privatization process. Applying conventional panel data analysis methods and using several robustness checks, we find that the separation of ownership and control through dual-class stock results in lower corporate disclosure. Disclosure is inversely related to the wedge between the control and ownership rights of the largest shareholder (specifically, it increases with her ownership rights but decreases with her control rights). There is also evidence that the effect of the wedge on disclosure depends on the type of controlling shareholder. The negative effect is most pronounced when the largest shareholder is a domestic private person and is virtually non-existent for foreign shareholders from non-offshore jurisdictions. The state and state-related companies as well as foreign entities from offshore jurisdictions occupy an intermediate position in this regard.