The effect of government ownership on Indonesia’s state-owned enterprises’ (SOE) firm performance

Reynaldi Hermansjah,Gracia Shinta S Ugut,Edison Hulu,Sugiarto Sugiarto

doi:10.5267/j.ac.2021.4.003

Abstract

This study aimed to analyze the impact of government ownership on Indonesia’s SOE’s financial performance, measured by Return on Assets (ROA) and Return on Equity (ROE) of 20 SOEs that are listed on the Indonesia Stock Exchange during the period 2013 – 2019, using the panel data models. According to the results, government ownership has a positively significant impact on the firm performance (ROA and ROE). Furthermore, the results show that along with government shares, debt to equity ratio, dividend payout ratio, and log of total assets also have significant relationships to the firm performance.

Highlights

Studies on the state or government ownership and its impact on firm performance remains to draw wide attention among academics, investors, and policy makers
This study aimed to analyze the impact of government ownership on Indonesia’s State-owned Enterprise (SOE)’s financial performance, measured by Return on Assets (ROA) and Return on Equity (ROE) of 20 SOEs that are listed on the Indonesia Stock Exchange during the period 2013 – 2019, using the panel data models
This study focuses on analyzing the impact of government ownership on firm performance of Indonesia’s State-owned Enterprise (SOE) that are listed in the Indonesia Stock Exchange (IDX)

Summary

Introduction

Studies on the state or government ownership and its impact on firm performance remains to draw wide attention among academics, investors, and policy makers. Government ownership impact on state-owned enterprises has become a compelling ownership structure to be studied, given that the government has the authority and substantial influence in the policy making process. Government ownership is believed to bring a ‘helping hand’ which assumes that the higher proportion of government ownership in a firm, the more capital subsidy is provided by the government. Government ownership is supposed to bring a ‘grabbing hand’ which assumes that the government will extract more of the firm's profit as a result of its ownership to the benefit of politicians and bureaucrats (Tian & Estrin, 2008). On the other side, some studies show there is a negative relationship between government ownership and financial firm performance (Ting & Lean, 2015; Tran et al, 2014)

Objectives

Results

Conclusion