INFORMATION TO USERS This manuscript has been reproduced from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, v/hile others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely afreet reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are reproduced by sectioning the original, beginning at the upper left-hand comer and continuing from left to right in equal sections with small overlaps. Each original is also photographed in one exposure and is included in reduced form at the back of the book. Photographs included in the original manuscript have been reproduced xerographically in this copy. Higher quality 6” x 9” black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. UMI A Bell & Howell Information Company 300 North Zceb Road, Ann Arbor MI 48106-1346 USA 313/761-4700 800/521-0600 SURVIVING IN RUSSIA'S BANKING INDUSTRY: THE CASE OF TOMSK, SIBERIA 1993-1995 DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By Tracy Claire Thoman. BBA, MBA The Ohio State University 1996 Dissertation Committee: Approved by Professor Sven B. Lundestedt, Adviser Professor Martha C. Cooper Adviser Professor Warren W. Eason Graduate Program in Business Administration UMI Number: 9639357 UMI Microform 9639357 Copyright 1996, by UMI Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. UMI 300 North Zeeb Road Ann Arhor, Ml 48103 Copyright by Tracy Claire Thoman 1996 ABSTRACT Recent attempts to implement free market reforms on Russian soil began in 1985. Since then, political considerations have greatly influenced the reality and magnitude of economic reforms. Political forces remain powerful and influential in today’s reforms. It is widely accepted that an economy needs an efficient financial system in order to develop. Russia's equity markets are highly inefficient and underdeveloped. Scholars and policy makers both inside and outside of Russia point to the country’s banking system as the most suitable catalyst for the thorough economic restructuring that is necessary if Russia's economy is to move forward from its current state of relative inefficiency and negative growth. A close examination of Russia’s banking system, however, reveals an industry that is inextricably linked to its predecessor system from Soviet times. Connections to governmental and underground structures remain integral to a bank’s operations. ITiis dissertation investigates Russian banking in the Western Siberian city of Tomsk during the two year period from September 1993 to September 1995 to determine the general state of banking and assess the preparedness of Tomsk banks to monitor enterprise restructuring toward more free market operations. The conceptual framework developed in this study includes a seven dimensional scale that is used to judge a bank’s level of orientation toward the market. It views banks with higher levels of market orientation as more likely to survive and serve as effective monitors of privatized enterprise restructuring as Russia continues to implement free market reforms. Interviews, observation and document analysis were the methods employed to assess the level of market orientation of the banks in Tomsk. Data was gathered from twenty seven out of twenty nine banks that existed in the city effective September 1995. Only two banks were found to have a high level of market orientation, but they were acting upon their beliefs in a cautious manner as the economic, political, social and legal environments in Russia do not yet fully support market oriented operations. Failed and state supported banks were found to differ significantly on six of the seven dimensions of market orientation from surviving banks. The surviving banks exhibited relatively higher levels of market orientation than the other two groups of banks. The results of this study support the statement that if Russia continues to implement free market economic reforms, banks need to be market oriented in order to survive and serve as proactive forces in Russian privatized enterprise restructuring. To Adell Marie IV ACKNOWLEDGMENTS Without the constant support, understanding and guidance of Dr. Sven B. Lundstedt, my adviser, this dissertation would not exist. I am deeply grateful to him beyond words. Dr. Martha C. Cooper gave me tremendous support as a fellow human being. I thank her for her participation and support of this dissertation. I am greatly indebted to Dr. Warren W. Eason for his interest, participation and guidance in my work. Without such diligent committee members, I would not have been able to complete my research and benefit from their teachings. 1 would like to express my sincere gratitude to all of the residents of Tomsk, Russia who gave of their time to me during this two year research process. I am particularly indebted to the twenty seven bank presidents who provided data for this study and to the two academicians, Felix Tarasenko and Alexey Timoshenko, who facilitated the majority of the meetings with these bankers. There are too many colleagues, friends and relatives who have kindly encouraged me during the long road toward the completion of this degree to mention here. I do thank them all. Finally. I am grateful mostly to my father, the late Harry L. Thoman, Jr. My pursuit of a doctorate degree was all his idea! VITA March 8, 1965...................................... Bom - Columbus, Ohio May 1987 ..............................................BBA Marketing and Spanish, The University of Notre Dame June 1989 ..............................................MBA International Business and Finance, The Ohio State University 1989 - 1993...........................................Graduate Teaching and Research Associate, The Ohio State University 1993 - 1994.......................................... Visiting Instructor, Tomsk State University and Tomsk Polytechnic University, Siberia, Russia Summer 1994........................................ Researcher, European Bank for Reconstruction and Development Russia Small Business Program, Tomsk, Russia 1995 - 1996........................................... Adjunct Professor, Department of Business, Accounting and Economics, Otterbein College 1995 - 1996........................................... Graduate Teaching Associate, The Ohio State University Summer 1996........................................ Adjunct Instructor, Department of Finance, The Ohio State University VI l^UBLlCAttONS 1. Tracy C. Thoman. 1996. Wliich Banks Could Effectively Monitor Privatized Firms During Restructuring? In Dimon, Tomlinson, and Nichols, editors. Competitiveness In International Business and Trade: Volume II International Trade, 483-497. Texas A&M International University Print Shop. 2. Tracy C. Thoman. 1996. Instructor's Manual to Accompany Cases in International Management: A Focus on Emerging Markets. St. Paul: West Publishing. 3. Tracy C. Thoman. 1996. Siberian Scholars’ Bank. In Hills, Leong, and Garcia, editors. Cases in International Management: A Focus on Emerging Markets, 127- 133. St. Paul: West Publishing. FIELDS OF STUDY Major Field: Business Administration Studies in: International Business and Finance VII TABLE OF CONTENTS Pape Abstract............................................................................................................................... ii Dedication ........................................................................................................................... iv Acknowledgments .............................................................................................................. v Vita....................................................................................................................................... vi List of Tables ..................................................................................................................... x List of Figures .................................................................................................................... xii Chapters: 1. Introduction ......................................................................................................... 1 2. An Economy In Transition ................................................................................ 9 3. Evolution of The Russian Banking System .................................................... 20 4. Conceptual Framework ...................................................................................... 34 5. Designing Research in an Uncertain Environment ........................................ 43 6. Collecting Data in a Formerly Closed City .................................................... 57 7. The Survey...........................................................................................................