Corporate Governance and Decision-Making in Business Groups

This chapter and the following one are devoted to independent legal entities that constitute united companies and are known as business groups (BGs) or holding company groups. In modern economic literature, BGs are defined as “a set of firms which, though legally independent, are bound together by a constellation of formal and informal ties and are accustomed to taking coordinated action” (Khanna & Rivkin 2001: 47–48). Russian law defines a parent company and its subsidiary, which together constitute a holding company group, as a pair of agents, one of which, namely, the parent company, has sufficient authority to determine the decisions of another based on ownership rights or any other type of control rights.1 In this respect, both terms, BGs and holding company groups, are synonymous.