Government-controlled Companies Research Articles

Corporate governance and performance of state-owned enterprises in a least developed economy

Purpose: The main objective of the study was to investigate how corporate governance affects the performance of state-owned enterprises (SOEs) in a least developed economy.Design/methodology/approach: Both primary and secondary data from nine state-owned companies that operated between 2001 and 2016 were analysed in the study. The investigation used a quantitative methodology. Fixed effects, random effects and generalised method of moments (GMM) estimations were used to conduct regression analysis.Findings/results: The findings show that corporate governance characteristics affect SOE performance in a least developed economy. The performance of SOEs is influenced favourably by board structures, director tenure, reduced government ownership and leverage. Conversely, increased state ownership leads to subpar performance. The study also reveals that the presence of civil servants and directors with political affiliations in government-controlled companies has a negative effect on enterprise value.Practical implications: The use of multiple case studies to investigate SOEs in their natural setting has given some insights for both professional managers and policymakers interested in developing corporate governance frameworks to improve SOEs value in least developed economies, particularly in sub-Saharan Africa, even though the results are limited in terms of statistical generalisation because the study was based on a single country.Originality/value: The study fills a gap in the literature about how SOE performance is affected by corporate governance in least developed nations, where such research is underdeveloped.

Government-Controlled Companies and Audit Committee Effectiveness: An Empirical Study on Saudi Stock Exchange

Government-Controlled Companies and Audit Committee Effectiveness: An Empirical Study on Saudi Stock Exchange

Limited Shareholder Inspection Rights in Singapore: Worrying Legal Gap or Unnecessary for Rankings?

Singapore’s formal corporate law and governance rules normally meet or exceed global standards – which explains why it regularly tops prominent Asian and global rankings for good corporate governance. As such, Singapore’s outlier status, as the only leading economy in Asia that does not provide a specific mechanism for shareholders to access corporate information, is puzzling. In this Article we aim to solve this puzzle by offering two explanations that appear to make sense out of Singapore’s outlier status as having an unusually restrictive shareholder inspection rights regime. The first, demand-side, explanation is that Singapore’s controlling shareholder-dominated landscape generates little demand for greater shareholder information rights. The second, supply-side, explanation rests on two elements. First, as the government is indirectly the largest controlling shareholder in Singapore, it may not have an incentive to expand inspection rights to allow shareholders greater access to the information of its government-controlled companies. Second, and most importantly, shareholder information rights have yet to become established as a significant indicium of “good corporate governance” by globally influential actors. As such, for now, the Singapore government has not needed to supply the formal law to send a signal of good corporate governance by meeting a prominent global standard for inspection rights, because such a standard does not yet exist. Viewed through the lens of our supply-side and demand-side explanations, in the context of Singapore’s unique corporate governance model, its restrictive shareholder inspection rights regime makes sense. Given the success of Singapore’s state and family controlling shareholder dominated system of corporate governance, its lack of shareholder inspection rights does not seem to have resulted in any serious corporate governance maladies. However, there are some signs that Singapore’s model of corporate governance may gradually be changing – and that the international interest in inspection rights is increasing – which may portend a greater need for a more facilitative inspection rights regime in the future.

Does ownership structure affect performance? Evidence from Chinese mutual funds

This paper examines the impact of ownership structure on Chinese mutual fund performance and market share. We focus on two dimensions of ownership structure, namely the background of the owners and the degree of ownership concentration. Using a hand-collected dataset comprising 731 observations for 94 fund management companies over the period from 2005 to 2015, we provide evidence with panel estimation shows that the government ownership ratio and government-controlled companies have a positive effect on funds’ performance. On the other hand, foreign ownership has a negative impact on performance and market share. Having a higher ownership concentration is more likely to increase the company’s market share, whereas government-controlled companies experience a negative impact on their market share.

Ownership Structure Impact on Dividend Policy of Listed Companies on Vietnamese Securities Market

This research aims to investigate the relationship between ownership structure and dividend policy of Vietnamese listed companies. The empirical findings show that the government-controlled companies, the companies with high concentrated ownership and with recent right issue activities would have higher dividend payments. In addition, due to the change of Vietnamese dividend tax rate to encourage the market development after global economic crisis, we discover that when the personal income tax rate at higher level of 5%, the sate-owned firms in Ho Chi Minh Stock Exchange would still pay higher dividends, which represents the dividend preferences of the investors, the status of firms’ stable development and the effectiveness of national economic policies.

How international competitiveness moderates the relationship between corporate governance and seasoned equity offering underpricing

When a company exhibits favorable management performance, investors may have higher intention to purchase its stock at a premium price; the company may also make more desirable decisions in international expansion, attain higher international competitiveness, win the preference of investors, and thus exhibit a higher stock price, which results in higher seasoned equity offering (SEO) underpricing. Therefore, international competitiveness possibly plays a crucial moderating role between corporate governance and SEO underpricing. The empirical results of this study show that compared with government-controlled companies, international competitiveness strengthens the relationship of SEO underpricing with one-family-controlled companies, two-or-more family-controlled companies, and manager-controlled companies. Accordingly, companies should improve their international competitiveness and conduct favorable corporate management to elicit the investment intention of market participants worldwide.

Women on corporate boards. The case of ’gender quotas’ in Italy

This paper investigates whether gender quotas have had success so far in their primary goal of reducing gender disparities in Italian corporate boards. Debate about gender equality on boards gained momentum and global prominence over the last years attracting attention of both researchers and practitioners worldwide. Despite a remarkable progress in education and their participation in the labor market, women still face large barriers to advance into upper management and boardrooms and gaps remain. Women are still under-represented in senior executive and board positions worldwide even if there is wide variation across countries. The present is a qualitative study that aims to contribute to the ongoing international debate about gender diversity on corporate boards (or lack thereof), providing current evidence from Italy, four years after the entry into force of Law 120/2011, establishing legislated quotas in order to ensure gender-balanced corporate boards. Using the samples of Italian listed companies and government-controlled companies tracked by Consob and Cerved respectively, findings show a substantial progress of female representation in Italian corporate boards (including governing and auditing boards) over the period 2008-2015 and reflect the extent to which women are shattering the glass ceiling, right before and after the implementation of the new (although controversial) gender quotas regulation. However, even though the number of women who sit on corporate boards has increased, it is necessary to ensure that the appointment of women is a board’s genuine intention to become gender diverse and more effectiveness rather than evidence of a result driven by tokenism, designed to enhance corporate reputation and image.

A survey of executive compensation contracts in China’s listed companies

We analyze 228 executive compensation contracts voluntarily disclosed by Chinese listed firms and find that central-government-controlled companies disclose more information in executive compensation contracts than local-government-controlled and non-government-controlled companies. Cash-based payments are the main form of executive compensation, whereas equity-based payments are seldom used by Chinese listed companies. On average, there are no significant differences in the value of basic salaries and performance-based compensation in executive compensation contracts. But, compared with their counterparts in non-government-controlled companies, executives in government-controlled companies are given more incentive compensation. Accounting earnings are typically used in executive compensation contracts, with few firms using stock returns to evaluate their executives. However, the use of non-financial measures has increased significantly since 2007.

Government Ownership, Accounting-Based Regulations, and the Pursuit of Favorable Audit Opinions: Evidence from China

SUMMARY This research finds that local government-controlled companies are able to obtain more favorable audit opinions from local auditors when they face the need for new equity financing or the threat of exchange delisting. We capture this ability by comparing the observed opinions that companies receive from local auditors with those that we predict they would receive if they used a Big 4 auditor. Our empirical results highlight the importance of understanding political and economic institutions when analyzing the reporting behavior of managers and auditors in a transition economy, and suggest that regulators should be aware of the unintended consequences of basing capital market resource allocation decisions on reported accounting earnings, which can be subject to significant managerial discretion.

Testing limits to policy reversal: Evidence from Indian privatizations

We examine the effect of regime change on privatization. In the 2004 Indian election, the pro-reform BJP was unexpectedly defeated by a less reformist coalition. Stock prices of government-controlled companies that had been slated for privatization by the BJP dropped 3.5% relative to private firms. Government-controlled companies that were under study for possible privatization fell 7.5% relative to private firms. This is consistent with investor belief of a “point of no return,” where advanced reforms are more difficult to reverse. Further analysis suggests that layoffs, combined with the privatization announcement, served as a credible commitment to privatize.

Structural Changes and Performance of the German Oil Industry

More than in many other countries, the oil market in West Germany is traditionally characterised by liberal trade patterns. This open market allowed a virtually free inflow of oil products. Hence, the pressure on prices at Rotterdam's spot market affected directly the product prices for German consumers. In all end-product markets, oligopoly and strong competition by outsiders prevail. If the cutthroat competition is intensified, this may lead to an alteration of the supply structure within the group of the quite heterogeneous market participants. The West German oil industry is passing through a period of painful economic adjustments. The shrinking of the market, changing demand patterns, and financial losses have led to the shedding of considerable over-capacity in refining and distribution. The process includes both a drastic reduction of simple (straight-run) distillation capacity and an increase in conversion potential, along with toll refining, reduction of marketing outlets, concentration of participants in processing and distribution, attempts at optimisation of downstream activities within the Common Market area, as well as the promotion of joint ventures with foreign state companies. The approach to the adaptation process varies from company to company according to upstream and downstream strength, financial position, access to sources of supply, international linkages, and special areas of interest. Of course, over-capacity of refining is a global phenomenon that cannot be eliminated without international co-operation. The problems may, after all, become even more complex after new export refineries in OPEC countries have been completed. This paper presents the results and features that reflect the reaction of the main companies affected. It describes the chances and challenges of a free oil market system. In recent years the petroleum industry in Germany has suffered heavy financial losses, and has embarked on a radical and seemingly successful adaptation process, but it remains vulnerable to developments on the world oil market. It would gain from better co-ordinated policies within the framework of the European Community—including a free play of market forces and a standardisation of environmental controls. Farther afield, the necessity for closer links to the government-controlled companies in producing countries is perceived to secure sources of supply on a basis of mutual advantage.

Potash and politics

World demand for potash for agricultural purposes will continue to expand with increasing world demand for food and fiber. World supplies of potash appear more than adequate to meet future increases in demand. However, potash reserves and production facilities are increasingly coming under the control of national governments and in the future the industry outlook will be affected more by political factors than by the economics of the marketplace. As a result, the private enterprise potash producer faces a difficult time competing in a world market dominated by large, politically motivated, government-controlled companies.