Banking on Family: Do Family Ownership Networks Matter for the Survival of Russian Banks?

Abstract

This study investigates how family kinship networks influence bank survival in Russia’s institutional environment from 2004 to 2020. Employing a novel graph database methodology to map ownership structures and kinship relationships amongst bank stakeholders, we analyse the survival determinants of Russian banks through Cox proportional hazards models with time-varying covariates, controlling for traditional CAMEL financial indicators. We test three Transaction Cost Economics mechanisms underlying family network protection: political embeddedness, tax optimisation through ownership fragmentation, and internal capital markets. Across approximately 139,000 bank-month observations on 1,092 banks, all three mechanisms reduce hazard rates, with ownership fragmentation among the most protective (around 8% hazard reduction per unit on the 0–100 scale in the enhanced specifications). Competing risks analysis reveals that family protection operates specifically against forced licence revocation by the Central Bank (HR = 0.991, p < 0.001), with no significant effect on voluntary liquidation or reorganisation. The protective effect is robust and directionally constant, and is concentrated in the 2013–2020 cleanup. We interpret this through a substitution–interference framework in which the same preservation behaviour reads as gap-filling substitution under weak institutions and as interference under state- led consolidation. The crisis-interaction terms are not statistically significant and the 2008 substitution channel is not separately identifiable (only five family-connected failures in the window), so the temporal pattern is carried by subperiod and governor-regime analyses. Granger causality tests and placebo falsification support the specificity of the family connection effect. These findings synthesise Ledeneva’s account of Russian informal practices with Helmke and Levitsky’s typology of informal institutional functions, and provide the first systematic empirical evidence that this duality is a property of the inconsistent institutional environment rather than a change in the function of family networks.