Abstract
PurposeState ownership has been common especially in industries with restricted competition. In Russia, state-controlled firms represent around 41 percent of the market value of all listed firms (Deloitte, 2015). Yet, there is a significant gap in the literature regarding the effects of various forms of government control in listed firms. The purpose of this paper is to fill this gap by exploring the impact of the complexity of state ownership and competition on the performance of Russian listed firms.Design/methodology/approachThe sample consists of data for 72 firms (360 firm-years) in the Russian MOEX broad market index during 2011–2015. The complexity of state ownership is captured by studying forms of state control including majority/minority, direct/indirect, federal/regional, mixed structures and golden shares.FindingsThe authors find significant differences in performance relating to different forms of state ownership. State control is negatively related to firm valuation and the sales/employees ratio. Performance is weakest when state ownership takes the form minority, regional or direct ownership. State control through golden shares typically outperforms other state-controlled firms. The authors find indications of employment prioritization beyond the economical optimum. In addition, the relation between state ownership and profitability becomes positive in sectors where state firms appear to enjoy lower competition.Originality/valueWhile the effects of state ownership have been studied on many markets, there is a lack of studies on the effects of different forms, or the complexity, of state ownership beyond direct and indirect ownership. The authors contribute to the literature on the performance effects of state ownership by studying a multitude of forms of governmental ownership as well as the role of competition in Russia. Especially the profitability of state-controlled firms is significantly affected by industry characteristics. Implications of the results are discussed both from firm and policy maker perspectives.
Highlights
State ownership has been common especially in sectors with restricted competition and entry barriers
We contribute to the literature on the performance effects of state ownership by studying a multitude of forms of governmental ownership in Russia during 2011–2015
We find that state control is associated with lower valuations in general, the effect is less negative for higher control levels compared to other owner types, and the effect of increases in fractional state ownership over 50 percent becomes positive
Summary
State ownership has been common especially in sectors with restricted competition and entry barriers. Studies of the performance of state-owned enterprises typically find that state ownership negatively affects firm profitability, efficiency and market valuation (Boardman and Vining, 1989; Megginson et al, 1994; Dewenter and Malatesta, 2001)[1]. Studies on developing countries such as Russia, China, and India indicate more. JEL Classification — G31, G34 © Eva Liljeblom, Benjamin Maury and Alexander Hörhammer. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
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