Performance Of State-owned Enterprises Research Articles

Nonperforming Debts in Chinese Enterprises: Patterns, Causes, and Implications for Banking Reform

Given the domination of bank financing, nonperforming debts (NPDs) in large Chinese enterprises are a proxy for nonperforming loans (NPLs) in China's major banks. Using a firm-level survey of more than 20,000 large and medium-sized industrial enterprises conducted by the National Bureau of Statistics of China, this paper estimates both the level and ratio of NPDs across ownership type, industry, and region for the period 1995–2002. The results show that NPD ratios have been falling since 2000 as a result of the rapid expansion of better-performing non-state enterprises (NSEs), the improved performance of state-owned enterprises (SOEs), and the exit of poor-performing enterprises (which has been facilitated by asset management companies and other merger and acquisition activities). SOEs, however, are still much more likely than NSEs to generate NPDs. This paper provides useful tools and sector information for assessing enterprise debt risks and draws lessons for banking reform in China.

Deconstructing State-Owned Enterprises in Socialist China under Reform: A Scalar Examination

Studies of economic transformation under socialism in general, and the growth and development of state-owned enterprises (SOEs) in particular, have been based on the assumption that SOEs are a homogeneous entity. With few exceptions, the extant literature tends to compare SOEs as a whole with other economic sectors. Little has been written about the heterogeneous nature of SOEs. The author examines the internal variation of SOEs at different administrative levels in terms of productivity and profitability in China, which remains one of the largest socialist economies undergoing profound structural changes. The performance of SOEs is found to have varied significantly among the administrative hierarchy of the socialist political system. The changing politics of scale from promoting regional self-reliance in the Maoist era toward both expanding SOE autonomy and fiscal decentralization in the post-Maoist era, has resulted in an increase in the disparity between the SOEs affiliated with the national government and those affiliated with local governments. The investigation of SOEs in the Chinese context raises important theoretical questions concerning the growth dynamics of SOEs and suggests the need for a more careful and path-dependent treatment of socialist economies under reform. The growth of SOEs in transitional socialist economies provides an interesting testing ground in which to evaluate the theoretical discourse concerning the politics of scale and the rescaling of politics.

Can corporatization improve the performance of state-owned enterprises even without privatization?

This paper examines an important reform program in China concerning State Owned Enterprises (SOEs), namely, corporatization without privatization. It finds that corporatization has had a significantly positive impact on SOE performance. It further shows that the sources of efficiency engendered by corporatization can be traced to the reform of the internal governance structure of these firms. The results indicate that, even without privatization, corporate governance reform is potentially an effective way of improving the performance of SOEs; such reforms represent a policy alternative for countries seeking to restructure SOEs without massive privatization. The results also suggest that it may be optimal for governments to carry out corporatization of SOEs before eventual privatization.

Entrepreneurial strategies in a transitional economy: Chinese state and non-state enterprises compared and contrasted

This study compares and contrasts certain characteristics of entrepreneurial orientations in response to China's emerging business environment among state owned enterprises (SOEs) and township/village enterprises (TVEs). A survey of SOE and TVE managers shows that, in comparison to SOEs, TVEs tend to be more innovative, adaptive and proactive in response to the dynamism and munificence of the business environment. SOE-TVE differences are less pronounced, however, with regard to environmental complexity. Implications for entrepreneurship research and practice as well as for the future performance of SOEs and TVEs are delineated.

Structural Reform Policy: Privatisation and Beyond—The Case of Greece

Privatisation, coupled with liberalisation and competition, constitutes one of the most popular policy options to improve the performance of state-owned enterprises. However, in Greece, it was only after 1991 that privatisation started to gain ground in the political and economic agendas of governments. Drawing upon the theoretical underpinnings of privatisation, the paper overviews and critically analyses the new legal framework on denationalisation in Greece. The paper argues that, though the modernisation of the legal regime is welcomed, the Greek government has failed to treat privatisation as part of wider structural reforms aiming at enhancing competition and foreign investment. The paper concludes that wider structural reforms, including regulatory reform and liberalisation, as well as combating corruption and bureaucracy and promoting transparent capital markets, are absolutely necessary in order to create a competitive environment, which would both complement and support privatisation efforts.

The Performance of State-Owned Enterprises and Newly Privatized Firms: Does Privatization Really Matter?

While it is well documented that privatization leads to an improvement in the performance of state-owned enterprises (SOEs) following divestiture, many of these studies do not consider the performance of control firms in similar pre-privatization situations. The purpose of this paper is to examine the performance of 54 newly privatized Egyptian firms against a matching number of SOEs. By matching sample firms (privatized) with control firms (SOEs) over 1994–98, our analyses show that privatized firms do not exhibit significant improvement in their performance changes relative to SOEs. These findings question the benefits of Egyptian privatization. Nevertheless, evidence from this study could be interpreted to mean that privatization improved the performance of privatized firms, which, in turn, may have had important spillover effects on SOEs. A study over a longer period is needed before these results can be considered conclusive.

Peruvian Privatization: Impacts on Firm Performance

In the nearly ten years since Peru privatized major State Owned Enterprises (SOEs), the overall impact of the process is not yet clear. This paper analyzes the impact of privatization through a detailed statistical and econometric analysis of first difference (the difference between pre- and post-privatization performance), and second difference (change in performance of privatized firms relative to the change in performance of SOEs) of several indicators on profitability, operating efficiency, employment, leverage and convergence. The results, which showed that privately owned firms are more efficient and more profitable than otherwise comparable state owned firms, were consistent with previous literature. In the case of the most competitive sector, the financial system, the newly privatized banks converged towards the leading private banks over time. While the impact of privatization on employment is negative in the short-run, there are more positive impacts in the long term, especially since SOEs traditionally hire employees for political rather than technical reasons. This paper demonstrates that, as the result of privatization, there is a significant increase in indirect employment through services and significant growth of total employment—both direct and indirect.

The Performance of State-Owned Enterprises and Newly Privatized Firms: Does Privatization Really Matter?

While it is well documented that privatization leads to an improvement in the performance of state-owned enterprises (SOEs) following divestiture, it is argued that many of these studies do not consider the performance of control firms of similar pre-privatization situations, i.e. the performance of SOEs. By matching sample firms (privatized) to control firms (SOEs), we find that privatized firms do not exhibit significant improvement in their performance changes compared with SOEs, which might put into question the benefits of privatization in Egypt. However, the caveat here is that the findings of no significant differences between privatized firms and SOEs might be attributed to one or more of the following reasons: the SOEs specific characteristics, the power of the non-parametric test and/or the small sample size, and changes in the economic system in Egypt and/or the restructuring process of the SOEs. Nevertheless, with all due respect to the findings from the statistical tests, the interpretation of the evidence of this study could mean that privatization improved the performance of privatized firms, which is in turn could have had important spillover effects on SOEs. Indeed, a study over a longer period is needed before these results could be considered conclusive. Keyword: SOEs, Privatization, Middle East, and Egypt

Product Quality Orientation and Its Performance Implications in Chinese State-Owned Enterprises

The authors model the performance implications of product quality orientation in Chinese state-owned enterprises and test the implications on a sample of 205 state-owned enterprises. The results show that product quality orientation has a positive impact on performance. This association is moderated by environmental uncertainty: The greater the perceived technological turbulence, the stronger is the relationship of product quality orientation to performance; the greater the perceived market dynamism, the weaker is the relationship. The results also show that the level of product quality orientation is lessened by perceived technological turbulence but enhanced by production routineness. Finally, state-owned enterprise performance is influenced inversely by perceived market dynamism but influenced positively by perceived technological turbulence.

The impact of the corporatization process on the financial performance of Canadian state‐owned enterprises

State‐owned enterprises (SOEs) have been described as being inefficient and losing money. The theories pretend that private property rights will solve the problem. In practice, SOEs are reorganized to follow the model of the private firm, a period known as the public sector corporatization. One critical element of this reform is an important modification of the mission of the firm away from social and toward profitability goals. Most SOEs become profit‐seeking organizations. The objective of this study is to examine the impact of the corporatization process on the financial performance of SOEs. From the Financial Post 500, we selected the largest SOEs in Canada. For each firm, the critical year of the mandate revision has been set as the beginning of the corporatization period. We covered the years between 1976 and 1996. The performance is measured from a multi‐criteria approach including measures of profitability and productivity. The results suggest that the financial performance of SOEs improves significantly when firms are corporatized. Therefore, the main difference in the financial performance is caused by the difference in the objectives of the firm, not the property or some dubious political activities.

Reforming China's state-owned enterprises construction

Reform of state-owned enterprises (SOEs) constitutes the central link of the entire restructuring of China's construction industry. The poor performance of SOEs was mainly attributed to the lack of autonomy and the vagueness in the delineation of property rights. Reform measures have been undertaken to address these issues, but the achievements are far from satisfactory. The paradox of increasing productivity and declining profitability calls for a sound plan to solve the SOE problem by considering both the root causes and symptoms. The relationship between the provision of sufficient, robust information and the performance of SOEs is analysed and, based upon this, the implications for further restructuring are assessed. The proposed solutions may be summarized as: creating a fair business environment for competition to enable each SOE's profit level to be used as a simple, low-cost and sufficiently informative indicator of managerial performance; transforming the traditional, centralized operation model so that the restructuring of SOEs as well as the whole construction industry can be realized. En Chine, la réforme des entreprises nationalisées est au coeur de la restructuration de l'ndustrie de la construction. Il faut attribuer les résultats médiocres des entreprises nationalisées au manque d'autonomie et au flou dans la définition des droits de la propriété. Des mesures de réforme ont été prises pour régler ces questions mais les résultats sont loin d'être satisfaisants. L'augmentation de la productivité et le déclin de la rentabilité constituent un paradoxe qui exige un plan visant à résoudre avec efficacité le problème des entreprises nationalisées en prenant en compte à la fois les causes profondes et les symptômes. Cet article analyse les relations qui existent entre la fourniture d'informations suffisantes et fiables et les résultats des entreprises nationalisées ; sur cette base, on évalue les conséquences d'une réorganisation plus poussée. On peut résumer comme suit les solutions proposées : créer un environnement économique équitable pour la concurrence afin que le niveau de rentabilité des entreprises nationalisées puisse servir d'indicateur simple, économique et suffisamment informatif des performances de la gestion ; transformer le modèle opérationnel classique, centralisé, dans la perspective de la restructuration des entreprises nationalisées et de l'ensemble du secteur de la construction.

State-Owned Enterprises in Less Developed Countries: Privatization and Alternative Reform Strategies

State-owned enterprises (SOEs) have typically played a much larger role in the economies of developing countries than developed countries. However, empirical evidence on the economic performance of SOEs generally yields negative results and suggests that SOEs are a major tax on the economies of developing countries reflected in the large operating subsidies required to sustain them. These inefficiencies seem in part attributable to ownership effects and partly to lack of competition effects. Empirical evidence on the effect of privatization of state-owned enterprises in both developed and developing countries suggests that this is often likely to lead to major improvement in economic performance. However, where privatization is not politically feasible, SOE reform alternatives such as management contracts, performance contracts, and greater exposure to competition may, in some contexts, enhance SOE performance, although typically they are second-best policy options to privatization.

State Ownership, Privatization and Performance in Singapore: An Exploratory Study from a Strategic Management Perspective

This paper considers the ownership debate with regard to state-owned enterprises (SOEs) performance, that is, whether superior performance of SOEs can be achieved under state ownership. While the traditional belief has been, supported by empirical work, that private ownership is generally associated with superior performance, the experience of Singapore is a clear example to the contrary. We outline global privatization trends and discuss the impact of privatization programs. We then discuss Singapore Telecom as a case where state ownership combined with several contextual and firm-related factors, especially firm strategy, has led to sustained world-class performance. We develop a theoretical framework for this analysis based on the strategic management field. We lastly outline some theoretical and practical implications of the analysis.

Shareholding structure and corporate performance of partially privatized firms: Evidence from listed Chinese companies

Equity ownership in a listed Chinese firm can have as many as five different classes: state-owned shares, legal-person (LP) shares, tradable A-shares, employee shares, and shares only available to foreign investors, a phenomenon that is unique to the Chinese equity market. In this paper, we investigate whether and how the corporate performance of listed Chinese firms is affected by their shareholding structure. The sample consists of all firms listed in the Shanghai Stock Exchange (SHSE) from 1991 to 1996. It is found that firm performance is positively related to the proportion of LP shares but negatively related to the proportion of shares owned by the state. Additional analyses indicate that firm performance increases with the degree of relative dominance of LP shares over state shares. Moreover, for the subsample of firms that do not have both state and LP shares, the return on equity (ROE) of firms with LP shares but no state shares is higher than that of firms with state shares but no LP shares by 3.84%, and this difference is statistically significant. On the other hand, there is little evidence in support of a positive correlation between corporate performance and the proportion of tradable shares owned by either domestic or foreign investors. These findings suggest that the ownership structure composition and relative dominance by various classes of shareholders can affect the performance of state-owned enterprise (SOE)-transformed and listed firms.

Reforming the Korean Public Sector: The Use of the Performance Contracting System

This paper examines the mechanics of the performance contracting system used in the Korean state-owned enterprise(SOE) sector and studies the impact it had on the SOE performance. The performance contracting system, called 'the Managerial Performance Evaluation System (MPES)' in Korea, is designed to improve the principal-agent setting by formalizing the relationship between the government and government-invested enterprises(GIE) through performance contracts. Just prior to the implementation of the MPES, between 1980 and 1983, the GIE sector received government subsidies totaling 3,544 billion Won or US$4.7 billion. Many accused the government of 'politicizing' operations of SOEs by imposing political objectives on managements. With mounting losses and public outcry concerning inefficient operation of SOEs, the government enacted the 'GIE Management Act' in 1984 in order to 'harden' the GIEs' budget constraint.

Balance Sheet or Ballot Box?: Incentives to Privatize in Emerging Democracies

When do political leaders in newly industrializing countries initiate needed economic reforms? This essay examines nine presidential or prime ministerial terms in Argentina, Mexico, Brazil, and India, 1982-1992. Among these cases, neither the reasonable hope of thereby improving the performance of state-owned enterprises, nor the crush of fiscal deficits or foreign debt, necessarily led to meaningful privatization. However, the prospect of domestic and/or international political benefits for the chief executive from privatization by firm, sector, or organizational task easily predicted decisions to transfer production to private owners. A rational choice model of policymaking accounts for outcomes quite well.

The Economic Performance of State-owned Enterprises in Argentina an Empirical Assessment

This paper empirically investigates the economic performance of 13 Argentine SOEs. Among them, one displays a behavior consistent with profit maximization, eight exhibit a behavior consistent with output maximization with a maximum loss constraint, and four show a behavior consistent with employment maximization. Such behavior taken together is consistent with the use of SOEs to achieve government macroeconomic targets. We also have found that, although different political regimes have different effects on the behavior of individual SOEs, there is no evidence that the SOEs as a group performed differently under military regimes than under the populist Peron regime.

Bureaucrats in business: The roles of privatization versus corporatization in state-owned enterprise reform

This article provides evidence from a sample of 12 developing countries that countries which improved state-owned enterprise performance the most followed a comprehensive strategy of reforms, including a combination of privatization and corporatization. Further evidence that corporatization works better in combination with ownership and other reforms is provided through an analysis of government contracts with public managers, private managers and private owners. Contracts with private managers and owners did better than contracts with public managers in part because the property rights of the former gave them a larger stake in the outcomes. The article analyzes the political economy of state enterprise reform and finds that privatization and corporation have similar political costs and tend to succeed or fail together. Where reform was politically desirable, politically feasible, and credible, countries privatized and corporatized successfully. When countries were not politically ready to reform, alternative ownership strategies were not successful in improving performance.

Strong Legacies and Weak Markets: Bulgarian State-Owned Enterprises During Early Transition

We examine the factors affecting the performance of state-owned enterprises (SOEs) during early transition to a market economy. Data come from a longitudinal study of a representative sample of Bulgarian SOEs for the period from 1989 (the last year under communism) to 1993 (three years after major macroeconomic shifts). We investigate how changes in authority structure, work organization, technology, marketing strategy, and organizational boundaries during these years affected organizational performance in 1993. We also assess the degree of path dependence in performance and the role of competitive industry conditions. Numerous organizational changes made by SOEs during early transition had little effect on performance. Yet organizational performance from 1989 to 1993 was highly path-dependent, although this dependence was mediated by the competitive conditions: Stronger markets displayed less path dependence. Overall the results favor the interpretations derived from selected neo-institutional and ecological perspectives of organizational sociology over neoclassical economic interpretations.

Determinants of the Repartitioning of Property Rights between the Government and State Enterprises

Previous articleNext article No AccessDeterminants of the Repartitioning of Property Rights between the Government and State EnterprisesLixin Colin XuLixin Colin XuWorld Bank Search for more articles by this author World BankPDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Economic Development and Cultural Change Volume 46, Number 3April 1998 Article DOIhttps://doi.org/10.1086/452357 Views: 5Total views on this site Citations: 9Citations are reported from Crossref © 1998 by The University of Chicago. All rights reserved.PDF download Crossref reports the following articles citing this article:Xunan Feng, Anders C. Johansson Underpaid and Corrupt Executives in China’s State Sector, Journal of Business Ethics 150, no.44 (May 2016): 1199–1212.https://doi.org/10.1007/s10551-016-3190-yXunan Feng and Anders C. Johansson CEO Incentives in Chinese State-Controlled Firms, Economic Development and Cultural Change 65, no.22 (Oct 2016): 223–264.https://doi.org/10.1086/688905David Lamond, Lihua Wang, Joel Nicholson, Jun Zhu Pay systems in Chinese state‐owned enterprises: a review, Chinese Management Studies 3, no.44 (Oct 2009): 328–355.https://doi.org/10.1108/17506140911007495Ping Yung, Lawrence W C Lai Quality Assurance in Construction by Independent Experts: A Case Study of the Efficiency Performance of State-Owned Enterprises in China, Environment and Planning B: Planning and Design 36, no.44 (Jan 2009): 682–697.https://doi.org/10.1068/b34038Ping Yung, Lawrence Wai Chung Lai Supervising for quality: an empirical examination of institutional arrangements in China's construction industry, Construction Management and Economics 26, no.77 (Jul 2008): 723–737.https://doi.org/10.1080/01446190801998690Nazrul Islam Vietnam's Lesson for China: An Examination of the Sachs–Woo Hypothesis, Comparative Economic Studies 50, no.11 (Mar 2008): 111–157.https://doi.org/10.1057/palgrave.ces.8100238Chong-En Bai, Lixin Colin Xu Incentives for CEOs with multitasks: Evidence from Chinese state-owned enterprises, Journal of Comparative Economics 33, no.33 (Sep 2005): 517–539.https://doi.org/10.1016/j.jce.2005.03.013Xiao-Yuan Dong, Fiona MacPhail, Paul Bowles, Samuel P.S. Ho Gender Segmentation at Work in China's Privatized Rural Industry: Some Evidence from Shandong and Jiangsu, World Development 32, no.66 (Jun 2004): 979–998.https://doi.org/10.1016/j.worlddev.2003.10.011Robert Cull, Lixin Colin Xu Who gets credit? The behavior of bureaucrats and state banks in allocating credit to Chinese state-owned enterprises, Journal of Development Economics 71, no.22 (Aug 2003): 533–559.https://doi.org/10.1016/S0304-3878(03)00039-7