Performance Of State-owned Enterprises Research Articles

Solve the Problem or Escape Responsibility? The Politics of Chinese Privatization Reform

This article investigates the Chinese privatization reform in the late 1990s, when the privatizations were implemented among small- and medium-sized state-owned enterprises and pushed by the local governments. Even though the Chinese privatization reform has been intensively discussed, few studies can fully explain how China’s local governments could increase fiscal surpluses through privatization under the condition that the policy burden of redundant workers was persistent. Hence, this paper proposes three hypotheses that reflect different motivations of the local governments. Testing the hypotheses via the method of process tracing for causal inference, I find that due to comparatively fewer subsidy payments, China’s local governments could have a fiscal surplus after privatization reform. By unveiling the mechanism, this article can help people to understand why China’s central and local governments had conflicting interests in the process of privatization. More importantly, it re-evaluates the role of China’s local government in the process of privatization. The original intention of the local government was to escape the responsibility of paying subsidies rather than solve the problem of bad performance in state-owned enterprises.

Is Narcissism Sustainable in CEO Leadership of State-Owned Enterprises?

The state sector has been an important part of many economies. This study measures the narcissism of the chief executive officers (CEOs) of state-owned enterprises (SOEs) unobtrusively, and examines the effect of narcissism on the performance and accounting earnings management of firms. This study shows that the narcissism of CEOs positively affects the performance of SOEs, and that the positive effect is a result of real management decisions rather than accounting earnings management. It also shows that CEO narcissism does not affect the earnings management of SOEs. However, this relation changes as the tenure of the CEO gets longer. As tenure gets longer, a CEO’s narcissism negatively affects the performance of a SOE, and a CEO with high narcissism is likely to be involved in earnings management to make up for weak performance. This study suggests that narcissism is not a sustainable leadership style. It also suggests that the personal characteristics of executives in public corporations are important in determining the performance of firms. While a longer tenure ensures that a CEO will pursue his/her strategy steadily, the leadership of a narcissistic CEO becomes negative and ineffective as their tenure gets longer. Considering the importance of SOEs in the economy, this is an important policy implication, as the appointment of a CEO and length of tenure are likely to be determined by the government.

Politically induced board turnover, ownership arrangements, and performance of SOEs

AbstractManuscript TypeEmpiricalResearch Question/IssueThis study investigates the impact of elections on board member changes and its relationship with profit‐oriented performance of state‐owned enterprises (SOEs), thus providing new insights on political tie heterogeneity.Research Findings/InsightsUsing a unique hand‐collected dataset of 200 SOEs in six countries of the former Socialist Federal Republic of Yugoslavia (SFRY) from 2010 till 2014, we find that board member changes within SOEs, unlike for private enterprises, are politically motivated rather than performance induced. We reveal that SOEs with higher levels of board member changes encounter lower productivity and profitability levels. These findings suggest that political interference via board member changes causes organizational inefficiencies and poor SOE performance. Moreover, the results show that board member changes are insignificant for the performance of large SOEs and SOEs governed by independent government body.Theoretical/Academic ImplicationsThis study reveals an indirect channel for political interference, thus contributing to a better understanding of political tie heterogeneity. Moreover, our study is the first to link political interference and performance of SOEs through introduction of election cycles into the board member changes–performance relationship.Practitioner/Policy ImplicationsThe results of this study provide insights for policymakers who are interested in enhancement of SOEs' performance. They suggest ways in which board appointment procedures should be altered as to be insulated from political interference. In addition, they show boards how they can lower the negative consequences of frequent board member changes.

Corporate ownership, efficiency and performance under state capitalism: Evidence from China

This paper studied the relationship between business performance and the ownership structure of firms focusing on Chinese state owned enterprises (SOEs) using a firm level panel data set of China from 1999 to 2011. By classifying all firms into different types based on their ultimate controlling shareholders, we found that SOEs in general underperform in the marketplace than private enterprises. However, among the SOEs in our sample, the SOEs controlled by central government outperformed all types of firms because they offered the highest asset turnover ratio and lowest business administration ratio by receiving favourable government treatment. We conclude that firm ownership type and work efficiency are the main factors that influence the differences in firm performance. In particular, the performance of SOEs controlled by central government is greatly determined by the degree of government intervention, which is referred to as State Capitalism.

Can state-owned holding (SOH) companies improve SOE performance in Asia? Evidence from Singapore, Malaysia and China

ABSTRACTThe establishment of an independent state-owned holding (SOH) company intends to separate political influence from state-owned enterprises (SOEs). While its role may work neatly in theory whether the government intervenes in the operation of SOH companies and whether the overall environment has capacity to support an SOH system is another issue. In this paper, it is noted that an SOH company serves both as an agent and a principal in a two-tiered relationship: Government–SOH and SOH–SOEs. This study argues how the dynamics among the three parties are interwoven affects the overall effectiveness of the SOH and thus the ultimate performance improvement of SOEs. We illustrate this by introducing typologies for three types of SOH in three Asian countries. In the process, we show that although institutional design such as legal framework matters, government’s willingness to enforce it and restrain itself from intervention also plays an important role. Overall, this research makes contribution to SOH and SOE literature by identifying distinctions for SOHs.

From welfare to wealth creation

PurposeThe purpose of this paper is to review several influential empirical studies that examine the performance of state-owned enterprises (SOEs). The paper undertakes a citation analysis of journals, authors and titles in the area of privatization and firm performance in general, and assesses the impact of privatization on the performance of SOEs in particular.Design/methodology/approachThe methodology is based on a systematic and structured review of over 100 papers published in economics, public management, business strategy and related social sciences. The systematic review is based on citation analysis of journals, authors and titles. The journal and author citation counts were tabulated by leveraging the databases of SCImago Journal Rankings and Google Scholar and filtered it to find out the most highly cited journals and authors. The structured review is based on the framing opinion with respect to major findings, variables selected, measurement techniques and statistical tools applied by different researchers. The impact is measured through coding a value “P” in case of positive effects, “N” in case of negative effects and “NT” in case the study found both positive and negative effects.FindingsThe citation analysis reveals that American Economic Review, Journal of Financial Economics, Review of Financial Studies and Journal of Finance as the top-cited journals, and Megginson and Netter (3,468), Megginson et al. (1,737), Djankov and Murrell (1,356), Boardman and Vining (1,320), Balsam et al. (1,094) and DeWenter and Malatesta (1,018) as the top-cited authors in this particular research field. While majority research studies have revealed a significant improvement in the performance of SOEs in the post-privatization period, few studies have reserved their impact as neutral or even negative in some respects.Originality/valueGiven that economic transitions, corporate governance, and performance of SOEs have attracted a great attention from public management and business strategy scholars in recent years, this paper aims to summarize a large number of empirical studies that examine the performance of SOEs. The paper would be useful to future researchers especially the beginners and early career researchers in terms of its current trends, selection of variables, measurement techniques and statistical tools applied.

State-owned enterprises in the contemporary global business scenario: introduction

PurposeThe purpose of this paper is to introduce the special issue on state-owned enterprises (SOEs) in the contemporary global business scenario. Against the theoretical background of and the invited themes for the special issue, the paper presents a summary of key findings and practical implications of the accepted papers and suggests future research directions.Design/methodology/approachThe paper is conceptual, which organized through utilitarianism or legitimism; SOEs scenario 1 – hungry fox, hunting bears; SOEs scenario 2 – dancing elephant, flying bears; what do we know and what we wish to explore; what have been examined; what we need to study further; closing note by bears’ well-wishers; and protocol of the special issue.FindingsBy deeply looking into emerging economies (China, India), developed economies (Denmark, Italy, Sweden), transition economies (Tunisia) and diverse sectors (public transport, space), coupled with cross-country sample data, the nine accepted papers have discussed several interesting findings and recommended numerous implications for the policymakers and SOEs’ managers. Drawing upon the interdisciplinary literature, empirical and qualitative papers would deepen the understanding of the growth strategies and performance of SOEs, and the application of management theories such as institutional theory, agency theory, social exchange theory, managerial grid theory, incomplete contracts theory and public governance view, among others. The issue also brings a review-cum-citation analysis paper on the impact of privatization on the performance of SOEs.Originality/valueThe papers have made unique contributions to the public economics, new public management, international business and organizational development literature by critically analyzing the burgeoning phenomenon of the changing dynamics and globalization of SOEs.

Financial performance of state-owned enterprises

Croatia is one of European countries whose share of state-owned enterprises (SOEs) in GDP is exceptionally high. Such companies are present across all economic sectors and their share in budget revenue is inconsiderable due to poor financial operations. The aim of this paper is to determine the financial performance of state-owned enterprises and draw attention to issues arising from the way their business operations are monitored. Given the statistical discrepancies in data, this analysis focuses mostly on the 2008 – 2016 period. The primary sources of the data used herein are the Financial Agency (Fina), the Ministry of Finance and the Ministry of State Property.

Corporate governance, privatisation, and financial performance of Indonesian state-owned enterprises

This study aimed to investigate the effect of corporate governance (CG) to state-owned enterprises (SOEs) performance before and after privatisation. The data consisted of primary data obtained through questionnaires, followed by focus group, and secondary data sourced from published annual reports of SOEs. This research gathered 94 observations of firm-year of SOEs listed in Indonesia. Multiple linear regression was employed to analyse the effect of the CG index on the financial performance, and paired sample t-test to test the performance before and after privatisation. The result shows that the CG index has a positive effect on the financial performance of SOEs. Furthermore, SOEs exhibited improved financial performance after privatisation. Accordingly, the government of Indonesia should selectively choose SOEs for privatisation to achieve the optimum results of privatisation in accordance with the priorities imposed by the government as the primary owner.

Analysis of the export performance of state-owned enterprises from Latin American and Caribbean, reviewing corruption and informal economy

State-owned enterprises from emerging economies have entered into an international expansion wave challenging the common assumption that these firms are limited to their domestic market. Literature however does not capture this new trend and address SOEs' activity from a limited viewpoint. Moreover, research on emerging economies and MNEs from these regions is rather general and clearly insufficient on the Latin American and Caribbean region. Following a quantitative strategy, we find that governments are strengthening the position of SOEs for different reasons other than just promoting exports. The institutional environment impacts the export performance of LAC SOEs, with informal economy facilitating the export performance of SOEs. Finally, data on corruption is slightly inadequate due to the sensitive of the topic, therefore a common framework for studying corruption is encouraged as it will both help advance research on the topic and help policy makers and practitioners to tackle corruption.

Analysis of the export performance of state-owned enterprises from Latin American and Caribbean, reviewing corruption and informal economy

Analysis of the export performance of state-owned enterprises from Latin American and Caribbean, reviewing corruption and informal economy

A Comprehensive Study on the Effect of XBRL-Adopted Financial Reporting on the Sensitivity of Executive Compensation Performance: A Multi-Dimensional Perspective

XBRL is an extensible business reporting language. XBRL-adopted financial reporting has been increasingly becoming prevalent in the field of financial accounting information. The related research of XBRL adoption is a hot topic, mainly focusing on technical specifications, classification standards, and application effects of XBRL adoption. However, currently few studies have paid attention to the effect of XBRL-adopted financial reporting on corporate governance, particularly on executive compensation management. Moreover, most of the conclusions from these studies are inconsistent. This paper aims to comprehensively explore the effect of XBRL-adopted financial reporting on the sensitivity of executive compensation performance creatively from a multi-dimensional perspective. This perspective includes three dimensions of the XBRL-adopted time period, firm property, and performance, plus the 3-D crossover. The findings show that a law exists for describing the evolution of the effect of XBRL adoption over time, which indicates that the effect of XBRL adoption during an early period is greater than that during a later period. In the firm property dimension, the sensitivity of executive compensation performance of state-owned enterprises (SOEs) is higher than that of non-SOEs after XBRL adoption, and the sensitivity changing rate of SOEs is also greater than that of non-SOEs. In the firm performance dimension, the sensitivity of the executive compensation performance of well-governed firms is higher than that of poorly governed firms after XBRL adoption, but the sensitivity changing rate of well-governed firms is smaller than that of poorly governed firms. Furthermore, in the cross-dimension of time period and firm property, the effect of XBRL adoption on the sensitivity of executive compensation performance in non-SOEs shows a similar law to that in the time-period dimension. However, no obvious law is shown in SOEs. In the cross-dimension of time period and firm performance, the effect of XBRL adoption on the sensitivity of executive compensation performance in well-governed firms also shows a similar law to that in the time-period dimension. However, no obvious law is shown in poorly governed firms. In the cross-dimension of firm property and firm performance, the sensitivity of executive compensation performance is closely correlated to firm performance, and correspondingly, poorly governed non-SOEs show a low sensitivity, which is even significantly lower than those in both the overall poorly governed firms and the overall non-SOEs. The findings can help firms to identify their special properties, performances, and XBRL-adopted time periods to make appropriate decisions to improve the performance of executive compensation management after XBRL adoption.

Fiscal expenditure, equity type, and firms’ operational performance

In China, expansive fiscal expenditure creates significant fiscal orders. However, whether, which, and how firms benefit from these fiscal orders is neglected in the literature. We configure a theoretical framework to separately analyse the effects of fiscal expenditure on product and capital markets. In the empirical analysis, we use A-share firms listed in China between 2003 and 2013 as our sample to investigate the relationship between fiscal expenditure and firms’ performance. We find that the performance of state-owned enterprises (SOEs) increases with increasing fiscal expenditure by improving asset utilisation and profitability. Corporate governance metrics such as management incentives and independent boarders can adjust this relationship. Our findings indicate that although fiscal orders are mainly acquired and executed by SOEs, the efficiency of expansive fiscal expenditure would be improved if more non-SOEs were preferentially targeted instead.

Can commercialization through partial disinvestment improve the performance of state-owned enterprises? The case of Indian SOEs under reforms

State-owned enterprises (SOEs) play an important role in an emerging economy, given that they are often the biggest employer as well as the largest contributor to the economy. In the past, privatization has been used as an important governance mechanism to reduce the inefficiency of SOEs. Notwithstanding all the benefits of privatization, it is not always a feasible option due to political and legal compulsions. This article investigates the impact of an important alternate reform programme, namely, partial disinvestment on the performance of SOEs and the major contingencies under which this relationship is likely to be affected. The study undertook multiple quadratic regressions, on an unbalanced panel data from 2001 to 2014 on a sample of 4774 observations belonging to 562 Indian SOEs. The results suggest that with initial disinvestment there is an initial improvement in performance, but with subsequent disinvestments, the SOE performance is seen to decline. The results indicate that, even without full privatization, moderate corporate governance reform is potentially an effective way of improving the performance of SOEs; such reforms represent an alternative for policymakers seeking to restructure SOEs without massive privatization. The study also finds that this variation in performance with state disinvestment efforts is contingent on the institutional holding in the firm and the competitive environment. Theoretical contributions to the emerging SOE literature and practical implications for the SOE managers are also discussed.

Corporate governance model in Thai state-owned enterprises: structural equation modelling approach

PurposeCorporate governance (CG) is a mechanism for directing, administering and controlling organisations. CG has become a vital component in driving efficient operation of state-owned enterprises (SOEs). The purpose of this paper is to examine the relationship between CG practices and the performance of Thai SOEs.Design/methodology/approachThis research is quantitative in nature; data were collected through a questionnaire, which was distributed to a sample of 1,140 respondents from 38 Thai SOEs. Structural equation modelling was used for data analysis.FindingsThe results indicate that the board of directors has a direct negative influence on the performance of Thai SOEs. However, management systems play a significant role in mediating the relationship between boards of directors and the performance of Thai SOEs. Additionally, corporate governance practices should be implemented not only at the board-of-director level but also at all levels of operation throughout the organisation.Practical implicationsTo develop effective boards of directors, SOEs should be pushed to develop the appropriate strategic management systems (i.e. risk management, internal controls, internal audits, human resource management and information technology). These systems allow boards of directors to access and use important information that will help guide the business process, which leads to performance improvement in SOEs.Originality/valueThis empirical study investigates the relationships between CG practices and the performance of SOEs in the context of developing countries.

Performance of SOEs: evidence on Botswana Telecommunications Corporation

PurposeThe purpose of this paper is to investigate fundamental performance drivers in a state-owned enterprise (SOE) in the context of organizational theories.Design/methodology/approachThis paper is based on a case analysis investigating how several factors, considered in the context of organizational theories, have combined to influence sustained performance at the Botswana Telecommunications Corporation (BTC). The study analyses both quantitative and qualitative data pertaining to an 18-year period from 1995 to 2012.FindingsThe paper supports the widely held view that agency and resource-based theories explain good performance, but challenges the popular view that political influence is always self-interest driven. A concept of positive public choice, under which such influence is driven by stakeholder interests and sustainability emerges. The case reveals that a selective approach to stakeholders defined how BTC crafted its good performance in a politically conducive environment.Practical implicationsBased on the research findings, a framework unifying political intervention with stakeholder interests needs to be developed and formalized with a link to SOE objectives. The framework would have clear performance measures linked to it, adequately monitored under a governance structure constituted from well-incentivized boards and managers with adequate strategic corporate resources under their control. The paper proposes such a framework.Originality/valueThe paper reveals an unexplored area of potential research, i.e. a positive public choice perspective under which societal interests are modeled with enterprise sustainability through political processes often blamed for poor performance.

Can partially privatized SOEs outperform fully private firms? Evidence from Indonesia

Privatization has been widely accepted as an effective avenue to improve the performance of State-Owned Enterprises (SOEs) and reduce the performance gap between SOEs and private firms. Since the 1990s, many SOEs in Indonesia have been partially privatized to optimize their potential. This study investigates if, following their privatization, performance gaps still exist between the partially privatized SOEs and private firms listed on the Indonesia Stock Exchange. Contrary to the common findings that governmental ownerships are associated with lower firm performance, this study finds that the financial performance of partially privatized SOEs was at least as good as that of private firms for the 13 consecutive years in the sample. In some years, the financial performance of the partially privatized SOEs was significantly higher than those of the private firms. A further analysis reveals that the higher financial performance of the privatized SOEs was not associated with opportunistic earnings management.

Comment on “The Current Wave of State Enterprise Reform in China: A Preliminary Appraisal”

Comment on “The Current Wave of State Enterprise Reform in China: A Preliminary Appraisal”

The economic performance of state-owned enterprises in Central and Eastern Europe

This article explores the economic performance of state ownership in the largest non-financial enterprises operating in 13 post-socialist Central and Eastern European (CEE) countries over the period 2007–2013. The largest state-owned enterprises (SOEs) are selected based on the ‘Coface – 500 Top Companies in CEE’ list in 2013. Of these 500 enterprises, 69 were identified as state-owned. All originated in the socialist period. The majority of them are from Poland and Ukraine. SOEs hold a dominant position in energy supply, the oil and gas sector, and transport. We find that the persistence of state ownership in post-socialist countries is caused by incomplete privatisation and the presence of SOEs within strategic sectors. The economic performance of the largest state-owned companies is, on average, comparable to their private counterparts.

Knowledge Management Practices and Organizational Learning Have Positive Impacts on Organizational Performance of State-Owned Enterprises in Indonesia

Abstract The performance of state-owned enterprises (SOEs) is rated as an important component of the economic development in Indonesia. Indonesian government has set strategic steps to fix the financial value of the SOEs. Knowledge management is one of strategic implementation of SOEs. The result of the researcher’s analysis reveals that the implementation of the knowledge management does not always give a positive contribution to the performance of the SOEs. Accordingly, it is important to conduct a research related to the efforts taken in implementing knowledge management and its impacts on organizational performance of the SOEs. The main objective of this study is to figure out the relationship between knowledge management and organizational performance by involving organizational learning as the intervening variable. This study involves six state-owned enterprises in Indonesia. The total number of respondents successfully examined were 189 employees of the six state-owned enterprises. The data was processed by SEM technique using AMOS 22 Software and the result shows that knowledge management has a significant impact by 45% toward organizational performance, and organizational learning influences significantly by 44% on organizational performance.