Governance Of State-owned Enterprises Research Articles

Institutional Logics and the Internationalization of a State-Owned Enterprise: Evaluation of International Venture Opportunities by Telecom Finland 1987–1998

We contribute to the research on internationalization of state-owned enterprises (SOEs) by studying the coevolution of state governance of SOEs and SOEs’ evaluation of international venture opportunities during a shift in dominant institutional logic from state to market logic. Using a novel digital historical method to study Telecom Finland, we argue that as state governance mechanisms change due to a logic shift, rationales underlying SOEs’ internationalization can significantly change and impact SOEs’ geographical and partner preferences. However, a logic shift also affords SOEs significant influence over the formation of new state governance policies under the new dominant logic.

Relationship between the effectiveness of Good Corporate Governance (GCG) policies with the occurrence of corruption cases in the State-Owned Enterprises environment

In the economic system, the role of State-Owned Enterprises is as an implementer of public services, distribution of resources that control the lives of many people, as pioneers/pioneers in the business sector that are not yet desirable by the private sector and as a source of state revenue. This role can be realized if the State-Owned Enterprise in its objectives can implement the principles of Good Corporate Governance (GCG) well. But in reality, it is often difficult to face challenges faced by State-Owned Enterprises managers in implementing good governance. The intervention of State-Owned Enterprises business management with a political-bureaucratic approach that is no different from other government agencies. And at worst there are still a series of corruption cases carried out by the leadership of State-Owned Enterprises to seek personal gain. This is certainly a contradiction with State-Owned Enterprise's governance which is always published. Existing GCG implementation policies are deemed ineffective because they are not adhered to. This illustrates that business governance in ` State-Owned Enterprises itself has not been going well. Improvement in the application of good corporate governance (GCG) must be carried out immediately and the improvement of the GCG ecosystem of the State-Owned Enterprise itself must receive the attention of the government. Synergy is needed with the government's commitment to forcing State-Owned Enterprises to implement GCG in a transparent and accountable manner, with a high level of professionalism and effectiveness.
 Keywords: Good Corporate Governance State-Owned Enterprises Government Implementation

Relationship between the effectiveness of Good Corporate Governance (GCG) policies with the occurrence of corruption cases in the State-Owned Enterprises environment

In the economic system, the role of State-Owned Enterprises is as an implementer of public services, distribution of resources that control the lives of many people, as pioneers/pioneers in the business sector that are not yet desirable by the private sector and as a source of state revenue. This role can be realized if the State-Owned Enterprise in its objectives can implement the principles of Good Corporate Governance (GCG) well. But in reality, it is often difficult to face challenges faced by State-Owned Enterprises managers in implementing good governance. The intervention of State-Owned Enterprises business management with a political-bureaucratic approach that is no different from other government agencies. And at worst there are still a series of corruption cases carried out by the leadership of State-Owned Enterprises to seek personal gain. This is certainly a contradiction with State-Owned Enterprise's governance which is always published. Existing GCG implementation policies are deemed ineffective because they are not adhered to. This illustrates that business governance in ` State-Owned Enterprises itself has not been going well. Improvement in the application of good corporate governance (GCG) must be carried out immediately and the improvement of the GCG ecosystem of the State-Owned Enterprise itself must receive the attention of the government. Synergy is needed with the government's commitment to forcing State-Owned Enterprises to implement GCG in a transparent and accountable manner, with a high level of professionalism and effectiveness.
 Keywords: Good Corporate Governance State-Owned Enterprises Government Implementation

The Governance of State-Owned Enterprises in Africa: an analysis of selected cases

Whilst some literature is of the view that; it is nearly impossible to cultivate good corporate governance culture in state-owned enterprises (SOEs), others believe that new strategies of implementing corporate governance systems together with political will can deliver SOEs out of their efficiency doldrums. This paper presents a scientific analysis of the contentious view on the possibility of creating efficient governance mechanisms in SOEs, explores the effective cost for governance failures in SOEs in Kenya, Zimbabwe, South Africa and Ethiopia. The paper makes conclusions and recommendation that the determinant factor to the success of SOEs in African countries is underpinned on the response of central government to the challenges of SOEs. Structural reforms, good governance, clear objectives and efficiency requires governments to take a decisive position. As a lasting remedial action, knowing which entities and when to offload them through privatisation, is an option in addressing the governance challenges in African SOEs. For strategic SOEs, the paper recommends that governments should consider listing them on public stock exchanges.

Does board independence enhance firm value of state-owned enterprises? Evidence from India and China

PurposeThis study aims to examine the effectiveness of governance in state-owned enterprises (SOEs) and explores if board independence enhances the firm value of SOEs in India and China. The study further explores the moderation impact of promoter ownership in enhancing firm value.Design/methodology/approachThe study is confined to government-owned enterprises in India and China and is based on a sample of 53 central government-owned firms listed in National Stock Exchange of India and 110 state-owned firms listed in Shanghai Stock Exchange of China for the period 2010–2017. A fixed-effect panel regression analysis has been used to examine the effect of board independence on firm value.FindingsThe study found that board independence adds value to the SOEs in India and China and the presence of independent directors (IDs) in the board of SOEs act as better monitors of performance to protect the interest of minority shareholders. Probably, they minimize agency conflict and provide resources to the firm and management. The greater the government shareholdings, the board independence further enhances value of SOEs in India and China.Practical implicationsCompliance with guidelines on IDs in SOEs serves as an effective corporate governance mechanism and the presence of IDs can signal better firm performance. The government promoters align with the IDs in better monitoring of SOE performance.Originality/valueThe study is unique and contributes to the literature by examining the impact of board independence on firm value in the context of SOEs in India and China and also provides insight on the effect of promoter ownership on the effectiveness on board independence.

Tracing back to the source: Understanding the corporate governance of boards of directors in Chinese SOEs

Based on the relevant theories of corporate governance and the special institutional background of Chinese state-owned enterprises (SOEs), this paper systematically reviews the literature on the independence and governance effect of SOE boards. We find that the governance effect of SOE boards is driven by the dual characteristics of SOEs: state involvement in ownership and market incentives. With the state involved in ownership, SOEs adhere to the leadership of the Communist Party of China (CPC), which results in an enhanced governance effect. Under market incentives, SOEs tend to have an optimal board structure that helps mitigate both the shareholder–management agency problem (Type I agency problem) and the controlling shareholder–minority shareholder agency problem (Type II agency problem). In terms of the governance effect of boards, directors appointed by non-controlling shareholders are effective in alleviating Type I and Type II agency problems, and this highlights the importance of mixed-ownership reforms in SOEs. Independent directors, especially those with a professional background, also play a role in improving corporate governance. However, independent directors in SOEs have relatively weak incentives to monitor, which limits their governance effect. This paper shows positive implications for promoting mixed-ownership reforms and improving board governance in SOEs.

Corporate governance in state-owned enterprises in Lesotho

PurposeThe purpose of this study is to discuss corporate governance in state-owned enterprises (SOEs) in Lesotho to influence policy debates.Design/methodology/approachThis is a desktop study that used the qualitative research approach. For this research, the case study method has been adopted. In terms of orientation, this is descriptive research. Data were collected from three-tiered sources: independent publications (e.g. World Bank); government publications; and newspaper articles. Data analysis was in the form of document analysis.FindingsThe study concluded that there are instances of poor and/or bad governance in SOEs in Lesotho. Egregious examples include transgressing against the Public Financial Management Act (2011) and the failure to submit Audited Financial Results.Research limitations/implicationsThe findings are limited to a specific case. Nonetheless, there are general lessons that can be drawn for African countries from the case study. A key general lesson is the imperative need to reconfigure the legal-institutional architecture of SOEs so that they create public value.Practical implicationsOther than cataloguing instances of poor and/or bad governance in SOEs in Lesotho, the paper goes further and accordingly makes policy recommendations to enhance corporate governance in SOEs in Lesotho.Originality/valueThere is no academic study on corporate governance in SOEs in Lesotho; therefore, there is a gap in the literature. Hence, the study makes an original contribution to the literature.

Politics and institution of corporate governance in Vietnamese state-owned enterprises

Purpose The paper aims to examine how the change in political ideology and institutions affects corporate governance (CG) of the state-owned enterprise (SOE) in Vietnam, as well as its consequences. Design/methodology/approach To link macro-level institutional change to micro level of the reform process of the Vietnamese SOE governance, we draw from the “Varieties of Capitalism” (VoC) framework adopt a triangulation approach for data collection. Findings The paper shows the CG of SOEs is a variant of capitalist CG. Changes in the function, state control and structure of governance in the Vietnamese SOEs have been shaped by the political ideology and institution. It also shows that the political and bureaucratic interferences of the state in SOEs are for political interests rather than for firms’ effectiveness. Research limitations/implications The political ideology has existed in major aspects of the governance structure of the SOEs as a part of the party’s effort to maintain its economic legitimacy and a government of “control and domination”. Practical implications The findings of this study can be seen as a reference for the Vietnamese Government and governments of other developing countries in making incremental improvements in existing institutions rather than choosing the “best” model of CG. Originality/value The paper contributes to the literature by applying the VoC framework to analyse the change in SOE governance in a transition country while preserving the communist ideology. It can deepen our understanding of the SOE governance in Vietnam and enrich comparative studies of CG in the transition countries.

State-owned enterprises in China: A review of 40 years of research and practice

State-owned enterprises (SOEs) are important components of the Chinese economy. Although SOEs are generally considered inefficient in operations, China’s economy, which relies heavily on SOEs, has been highly successful over the last four decades. This indicates the importance of SOEs in China’s past and future economic success. Therefore, in this study, we review the literature on economic theories and 40 years of practice of Chinese SOEs and discuss implications for future research. Our review consists of four parts: the theories of SOEs and their reform, the performance and financing strategies of SOEs, corporate governance in SOEs, and corporate social responsibility in SOEs.

Governance and State-Owned Enterprises

State-owned enterprises (SOEs) are present in key sectors of the economies around the world. While they can provide an important public service, there is widespread concern that their activities are negatively affected by corruption. However, there is limited cross-country analysis on the costs of corruption for SOEs. We present new evidence on how corruption affects the performance of SOEs using firm level data across a large number of countries. One striking result is that SOEs perform as well as private firms in core sectors when corruption is low. Taking advantage of a novel database reforms, we also show that SOE governance reforms can generate significant performance gains.

State-Owned Enterprises in Bosnia and Herzegovina

Based on a new database of State-Owned Enterprise (SOE) financial statements, we find that SOEs in Bosnia and Herzegovina are mostly in poor financial shape. We estimate the overall size and composition of the SOE sector, and identify individual companies that affect fiscal and macroeconomic performance. Financial analysis suggests that SOEs are not contributing enough to the economy. We also review the SOE governance framework and find that governments do not exercise their ownership function in line with WB/OECD guidelines. Reforms to the governance frameworks are necessary to foster transparency and improve accountability. More fundamental reform of the SOE sector might increase overall GDP by 3 percent per year.

Corporate governance and democratic accountability: local state-owned enterprises in Norway

AbstractTransferring public service provision to state-owned enterprises (SOEs) raises concerns over accountability deficits. We argue that the governance of SOEs requires reconciliation of the accountability relations found in traditional models of public administration, and the normative structures of control and accountability developed in the world of private enterprises, commonly referred to as corporate governance. To this end, we propose a model for structuring accountability relations between SOEs and governmental owners. The model prescribes a distinction between the roles of elected representatives and top managers as “forums” for accountability concerning the governmental owner’s mission-related and non-mission-related preferences towards the SOE. The model’s relevance is tested empirically using data from a study of SOEs in Norway’s local government sector. The analysis indicates that accountability practices in line with the prescriptions of the model were associated with a heightened sense of control over the SOEs.

Corrective Justice: An Economic Approach for Law

Corruption has a negative impact on people’s lives and statehood. The strategic positions in State-owned enterprises (SOE) are vulnerable to abuse of power and authority which has an impact on state losses. The concept of interpretation of the legal system of state finance in SOE governance actually raises its own problems. The purpose of this study is to obtain an overview and analyze policy solutions for understanding law enforcement of state finance, state admission law, and SOE. Research methods is normative descriptive juridical on public companies and state finances laws. The inclusion of elements detrimental to state finances in the formulation of criminal acts of corruption brings certain legal consequences in the field of evidence law. The concrete facts in the court of law that there is no explicit difference in principle and consequently between public law and private law bring its own problems in the field of law. Efforts to support SOE in line with the principles of Good Corporate Governance (GCG) and efforts to save state finances are counterproductive. The results of the study as a framework for formulating policies to avoid the injustice of law enforcement in concreto towards the application elements of state financial losses.

Governance and State-Owned Enterprises: How Costly is Corruption?

State-owned enterprises (SOEs) are present in key sectors of the economies around the world. While they can provide an important public service, there is widespread concern that their activities are negatively affected by corruption. However, there is limited cross-country analysis on the costs of corruption for SOEs. We present new evidence on how corruption affects the performance of SOEs using firm level data across a large number of countries. One striking result is that SOEs perform as well as private firms in core sectors when corruption is low. Taking advantage of a novel database reforms, we also show that SOE governance reforms can generate significant performance gains.

State-Owned Enterprises in Bosnia and Herzegovina: Assessing Performance and Oversight

Based on a new database of State-Owned Enterprise (SOE) financial statements, we find that SOEs in Bosnia and Herzegovina are mostly in poor financial shape. We estimate the overall size and composition of the SOE sector, and identify individual companies that affect fiscal and macroeconomic performance. Financial analysis suggests that SOEs are not contributing enough to the economy. We also review the SOE governance framework and find that governments do not exercise their ownership function in line with WB/OECD guidelines.Reforms to the governance frameworks are necessary to foster transparency and improve accountability. More fundamental reform of the SOE sector might increase overall GDP by 3percent per year.

POLITICS OF LAW OF RISK MANAGEMENT APPLICATION IN THE MANAGEMENT OF THE STATE-OWNED ENTERPRISES IN INDONESIA

<p>Risk management within the State-Owned Enterprises (SOEs) is formally regulated; however, risk-conscious cultures have not been seen as strategic needs. Orientation on opportunity, profit growth, and market share still dominate decision making. Risk management is still often considered to hamper the process and slow growth. Risk awareness values are considered important to build and entrenched in an ongoing system so that risk awareness is internalized in every decision-making process. The following descriptions are based on literature studies and empirical experiences the authors describe the ideas and experiences of introducing and building risk awareness culture in the environment of state enterprises in the early stages. UU NO. 1 of 2003 on SOEs does not regulate in detail about risk management on SOEs. The existence of risk management is contained in the Regulation of the Minister of SOE numbered PER-09 / MBU / 2012. This regulation contains amendments to Article 12 paragraph 10 PER-01 / MBU / 2011 concerning the implementation of Good Corporate Governance in State-Owned Enterprises, and is regulated in more detail at the Decree of the Secretary of the Ministry of SOEs No. SK-16 / S.MBU / 2012 on the assessment indicators / parameters and Evaluation of Good Corporate Governance Implementation on SOEs. The legal politics that exist despite their existence, but lacks a strong philosophical meaning because the rules are not supported in detail in regulation at the level of law.</p>

A Lesson from two Failed Foreign Investments: the Foreign (Ad)Venture of two Finnish State-Owned Enterprises

As an organisational failure may teach more than an organisational success, this article describes the failed foreign investments of two Finnish stateowned enterprises (SOEs), namely Sonera and Stora Enso. In 2000, Sonera acquired a mobile phone licence in Germany and Italy for USD 4,000 million. Two years later, it turned out that the licence was worthless. In turn, Stora Enso acquired an American paper firm for USD 5,000 million in 2000, but seven years later Stora Enso sold this US unit at a loss of USD 2,000–3,000 million. These two cases reveal that the major reason for these failures was the inability of SOE management to predict business development. Other major reasons for failure were the conflicting motives of the management and the company (the main shareholder), and inadequate state control. Passive control of the state may encourage SOE management to exercise adventurous investment policies and take major risks. In Sonera’s case, unrealistic risk taking led to serious financial difficulties, and finally, to a forced sale of the entire group to Telia, the Swedish telecom company. Stora Enso’s stronger financial position saved it from an organisational failure. A lesson to policy-makers: a responsible minister and the minister’s subordinates should exercise a more active ownership policy and keep the political interests of his/her party subordinate to the strategic interests of the state. Recent public discussion on SOE governance in Finland reveals that the Finnish Government still experiences difficulties in fully digesting the wisdom of the OECD Guidelines of Corporate Governance of StateOwned Enterprises.

Industrial policy and state-making: Brazil’s attempt at oil-based industrial development

This paper examines the changing strategies of developmental states using Brazil’s oil-based industrial policy as a case study. We analyse the relationship between the state, Petrobras and industrial elites in the context of Brazil’s renewed emphasis on sector-specific industrial development strategy. Taking stock and re-examining the developmental state model, we suggest that developmental states are inherently political, particularly their bureaucracy and state-owned enterprises (SOEs), and that money politics is intricately woven into state-guided high growth regimes. Given the difficulty of privatisation as a solution to SOE (mis)governance, the challenge for Brazil is to mediate extreme political interventions that have eroded Petrobras’ autonomy in the past and to sustain institutional capacity to direct rents towards investment and innovation.

An Assessment of Good Corporate Governance in State Owned Enterprises of Mauritius

Abstract The study seeks to assess the impact good corporate governance in State Owned Enterprises (SOEs) of Mauritius by obtaining the general perspectives of employees in this particular sector. This study comprised of two stages. Firstly, a focus group discussion was conducted among few employees in SOEs of Mauritius. This exploratory phase was useful in identifying additional views on the impact, barriers, issues and challenges on the level of good corporate governance in SOEs of Mauritius. A survey was then being conducted as a second phase of the study among a sample of employees from SOEs in Mauritius. The analysis focused on the objectives of the study, which were to assess the practice of good governance in SOEs in Mauritius, its benefits and the barriers towards practicing good governance in these firms. The major findings of the study showed that most respondents acknowledge the positive impact of good corporate governance in the day to day of their organisations. However, they also reported that constant governmental intervention acts as a barrier for the proper functioning of SOEs in Mauritius.

Do State-Owned Enterprises Have Worse Corporate Governance? An Empirical Study of Corporate Practices in China

Prior literature on corporate governance in China asserts that state-owned enterprises (SOEs) are inefficiently run and badly governed—they are either worse than privately owned enterprises (POEs) or as bad. There is, however, no solid empirical evidence that underpins either claim. Using a unique, hand-coded data set on corporate charter provisions in a random sample of nearly 300 publicly listed Chinese firms, we develop an additive corporate governance index. The index shows that the corporate governance of SOEs firmly controlled by the Chinese central government is more in favor of minority shareholders, whereas that of SOEs firmly controlled by provincial governments appears to be less protective of minority shareholders. Overall, SOEs, particularly those controlled by the central government, do not have worse firm performance than POEs, as measured by industry-adjusted Tobin’s Q. Nonetheless, firms that are more politically compliant have worse firm performance. This paper demonstrates the nuanced differences among SOEs and their performance vis-a-vis POEs.