Privatization Of State-owned Enterprises Research Articles

Origin matters: Privatization of state‐owned enterprises and family business internationalization

AbstractThe impact of a firm's origins on its strategic decision‐making has attracted scholarly attention in recent years. Focusing on firms' origins, this paper explores the relationship between the privatization of state‐owned enterprises (SOEs) and family business internationalization. Based on data from listed family businesses in China from 2003 to 2022, we find that compared to entrepreneurial family businesses, restructured family businesses have a lower internationalization degree. Moreover, high trade policy uncertainty strengthens the negative relationship between the privatization of SOEs and family business internationalization, while high family involvement plays a weakening role. Several robustness tests later, the findings remain valid. This study introduces the firm's origin as a vital determinant, which may contribute to the prior studies on family business internationalization. Besides, this paper complements research on the economic consequences of the privatization of SOEs in China. Finally, this paper may help Chinese family businesses actively participate in the international cycle to achieve competitive advantage and high‐quality development.

Large state-owned shareholders and cash holding: Evidence from family firms

This paper investigates the effect of large state-owned shareholders on cash holding in family firms. Using a large sample of Chinese listed family firms for 2012–2022, we find that large state-owned shareholders positively impact cash holding in family firms. The finding remains valid to a battery of sensitivity tests and is attenuated for family firms with higher control power of the controlling shareholder, family firms originating from the privatization of state-owned enterprises, and family firms located in regions with lower levels of institutional development. Economic mechanism tests show that large state-owned shareholders increase cash holding in family firms by reducing related-party transactions and perk consumption. These findings support the view that better corporate governance may increase corporate cash holding and suggest that state-owned ownership is an essential variable in the predictors of cash holding in family firms.

Public Financing Model Through Long-Term Contractual Agreements for Public-Private Partnership Projects

This research aims to analyze alternative models of public financing in the Public-Private Partnership (PPP) scheme involving the government and the corporate sector. This research utilizes a qualitative research method with a content analysis data collection methodology to examine the limitations and shortcomings of PPPs. The findings of this study indicate that Public-Private Partnerships (PPPs) have shown a persistent pattern of failure, leading to continuous renegotiation between the government and the private sector. The implementation of PPPs carries risks that can lead to a loss of public oversight of PPP initiatives. The government's lack of experience in making judgments that can carry political risk also plays a role. The PPP model sets a higher cost of capital, which causes the private sector to charge higher tariffs to customers, possibly resulting in a monopoly by private companies. PPPs have imposed a burden on the state and faced opposition to privatization due to a lack of understanding among parties involved in state-owned enterprises (SOEs). The government lacks transparency in decision-making regarding privatization and fails to provide adequate information to stakeholders involved in SOE privatization. Government decision-making on privatization lacks transparency and does not follow established processes and procedures.

PRIVATIZATION OF STATE-OWNED ENTERPRISES THROUGH INITIAL PUBLIC OFFERINGS (IPOS): ASSESSING THE IMPACTS AND CHALLENGES

The privatization of state-owned enterprises (SOEs) has been a widely adopted strategy by governments worldwide to promote economic efficiency, enhance market competition, and attract private investment.

Research on the Impact of State-owned Enterprise Privatization Reform on Firm Innovation

Over the past few decades of state-owned enterprise (SOE) privatization in China, though many studies have been done concerning different aspects of relationship between the privatization of SOE and firm development, little was known about the impact of state-owned enterprise privatization reform on firm innovation. Some of the prior literature didn’t manage to provide a convincing result to a certain extent as the data the chose was not enough. This article utilizes a substantial dataset of more than 28,000 listed companies that have undergone privatization, extracting the R&D expenditure data of listed companies from Wind database spanning from 2010 to 2022. After systematic investigation of the impact of SOE privatization (as measured by a dummy variable) on innovation (as measured by R&D investment) using the model of regression, it can be found that the privatization of state-owned enterprises in my country has had a negative impact on corporate innovation, as certain preconditions are needed for the success of privatization and restructuring, which plays a vital role in avoiding certain risks after privatization.

Privatization of public enterprises in the emerging market: Problems and prospects

State-owned enterprises (SOEs) are known to provide service delivery to people because of their lack of profit motives. However, politicians (elected officials) who engage in corrupt practices often use SOEs as cash cows. Simultaneously, SOEs’ success drives national economic development and aid in the fight against poverty. The aim of this study was to investigate whether privatization of SOEs can turn around the losses they make and lead to viability. This study employed a desktop approach in which reports, financial statements, and various documents on numerous SOEs were reviewed. The time span used for the reviewed documents was 20 years (2002–2022). The findings of this study indicate that many SOEs in South Africa have incurred insurmountable losses due to corruption and poor fiscal management. Thus, privatization of such entities may look noble, yet it is a short-term fix to the problem.

Keterkaitan Hukum Privatisasi BUMN Terhadap Kewenangan Negara

Privatization of State-Owned Enterprises (BUMN) in Indonesia. Privatization is undertaken with the intention of enhancing company performance, contributing to the country's economy, and improving less efficient management. However, there are concerns regarding the loss of economic sovereignty through privatization. The Indonesian government has implemented a privatization policy based on the 1999 GBHN and the 2003 BUMN Law. Privatization has various dimensions and objectives, including reducing the state's role in the economy, increasing management efficiency, and filling the state budget deficit. The role of BUMN in development has been significant, but there have also been cases of poor management and financial losses. Privatization of BUMN is considered to overcome this problem and improve company performance. However, there are challenges in achieving professionalism and competitiveness in BUMN because employee status is like civil servants. There is also controversy regarding privatization, with some arguing that certain sectors should remain under government control in the interests of the economy. The privatization of BUMN is regulated by the BUMN Law, which emphasizes the importance of transparency, accountability, and fairness in the privatization process. However, there are concerns regarding the consistency of these regulations with the Constitution. Therefore, it is recommended that there be restrictions on the sale of shares during privatization and that the government maintain majority ownership of the shares. Apart from that, a clear definition is needed for the purpose of privatization and more detailed regulations in the BUMN Law.

Is state-owned enterprise merging private enterprise “market choice” or “space crowding” ? —Based on the motives of equity transfer of mixed-ownership enterprises

Many state-owned enterprises have mergers and acquisitions (M&A) with private enterprises, which has caused private enterprises to worry about their living space being squeezed. Based on 572 data records about equity transfers of Chinese listed companies extracted from CSMAR4.0 from 2013 to 2020, this paper categorized ownership structures into three categories: privatization of state-owned enterprises (Category 1), state-owned enterprises merging private enterprises (Category 2), and state-owned enterprises merging state-owned enterprises (Category 3). The categorical regression of ex-ante equity transfer motivation revealed that the motives for Category 1 conformed to the phenomenon of the “pretty girl gets married first” and “embezzlement view.” Category In contrast, the motives for Category 2 conformed to the “fiscal revenue view.” The categorical regression of ex-post equity transfer motivation showed that all three types significantly improved various efficiencies and represented an optimal allocation of resources. Moreover, it was revealed that the transfer of equity to state-owned enterprises by inefficient private firms in Category 2 also significantly improved enterprise efficiency. Thus, it can be considered as a rational behavior of market selection and never squeezed the space crowding. Further analysis showed that the efficiency improvement is due to the symbiotic development relationship rather than the antagonistic relationship between heterogeneous shareholders. Therefore, it is suggested to initiate market-oriented reform by actively developing ownership mixed-ownership economy and adhering to the “two unwavering” basic economic system.

The Motives for Issuing Exchangeable Bonds in the Privatization of State‑Owned Enterprises

Using a unique sample of exchangeable bond issues carried out in seven countries since the 2000s, this paper investigates the role of hybrid debt in the privatization of state‑owned enterprises (SOEs) via government‑controlled investment vehicles. This research shows that so far, sixteen series of exchangeable bonds amounting to approx. USD 25 billion were issued to privatize ten SOEs in the telecommunication, energy, basic materials, industrials, healthcare, and utilities sectors in Europe and Asia. Moreover, in some cases, the privatization of SOEs by means of exchangeables can prove to be a more favorable alternative to traditional methods of selling shares directly on the capital market, for example, via IPOs or SPOs (during periods of deep undervaluation of privatized companies or of high stock market volatility). First, shares can be sold at a later date and at a higher price. Second, the impact on the stock market price of an SOE may be less disruptive to shareholders. Third, the entire privatization process tends to be more flexible for issuers in that they can perceive exchangeables as a source of relatively cheap, long‑term external capital while keeping control over the privatized company until the potential conversion of debt by bondholders.

The Spillover Effects of Privatization on Efficiency and Income Inequality in China

Purpose - This study examines the spatial and inter-temporal spillover effects of privatization on the corporate efficiency and regional income inequality of Chinese state-owned enterprises (SOEs).
 Design/Methodology/Approach - The spatial Durbin model (SDM) is used in regressions to examine the spatial and inter-temporal spillover effects of the privatization of SOEs on improving the efficiency and income inequality of Chinese firms across regions. A panel dataset of Chinese-listed firms from 2008 to 2018 is used. The stochastic frontier analysis method is applied in estimating corporate efficiency.
 Findings - First, the privatization of Chinese SOEs increased their efficiency, but exacerbated their income inequality. Second, the globalization activities after the privatization of Chinese SOEs increased their efficiency, but exacerbated their income inequality. Specifically, exports decrease income inequality, while outward foreign direct investment or OFDI has an inverse U-shaped effect on income inequality. Third, the privatization improved overall corporate efficiency within the province and that of neighboring provinces. Fourth, the Chinese SOE firms after privatization aggravated income equality within the province and that of neighboring provinces.
 Research Implications - In general, the results of this study indicate that the privatization of SOEs and the globalization activities after the privatization have improved the efficiency of Chinese firms, but worsened income equality within the province and that of neighboring provinces. Therefore, there is a strong need for governmental policies to cure income equality in provinces around the location of privarized firms.

중국 국유기업의 부패와 총자산수익률(ROA)에 관한 실증분석

China, as a country that preceded regime change, is a country that has implemented a gradual transition. The liberalization and privatization of state-owned enterprises in the process of systemic transition originated corruption in state-owned enterprises. In the present study, China's corruption and state-owned enterprises' return on assets (ROA) are empirically analyzed to explore the relationship between corruption and state-owned enterprises in China. Based on the present research results, the main purpose is to prevent corruption problems which eventually may occur in existing socialist countries and previous socialist nations that preceded system transformation and reduce trial and error. As the present study analyzed financial statements of Chinese state-owned enterprises, it is judged to be the basis for future follow-up studies. Indices such as democracy, freedom of speech and economic freedom, which have been used when analyzing socialist or dictatorship countries, come to be adopted as corruption-related indices when conducting empirical research on ROA, which is comprehensively analyzed to differentiate from other studies. This has an important significance in which it allows an approach to the country's corruption problem from more diverse perspectives and spectrums.

Privatisation Policy and the Ghanaian Gold Mining Industry

Abstract The World Bank and International Monetary Fund (IMF) help ailing developing economies to address their debts and economic crises. To receive this help, however, these international financial institutions (IFI s) have in the past demanded reforms, termed Structural Adjustment Programmes (SAP). One of the SAP policies has been the privatisation of state-owned enterprises (SOE s), which Ghana embraced and implemented from 1983. This article evaluates Ghana’s privatisation of the Ghanaian gold mining industry (the second-largest foreign-exchange earner and major beneficiary of the policy). Using predominantly academic and popular literature, data from the Ghana Chamber of Mines and insider accounts, this study reveals that the policy has resulted in benefits (organisational and national gains) and costs (social and national costs). The article calls on the World Bank/IMF and the gold mining industry to renew their commitment to the recognition of the social and environmental benefits to the citizens.

Enterprise Resource Planning System Usage and Stock Price Crash Risk

We examine whether Enterprise Resource Planning system (ERP) usage affects the stock price crash risk of Chinese firms, and whether the effect differs between state-owned enterprises (SOEs) and non-SOEs. We find that ERP usage is associated with lower stock price crash risk, but this pattern is largely concentrated in non-SOEs, consistent with our arguments that more acute shareholder-manager agency problem and more organizational rigidity can inhibit the successful assimilation of ERP. The results are further confirmed by a difference-in-differences analysis exploiting the privatization of SOEs as a negative shock to their shareholder-manager agency problem and organizational rigidity. Three channels help explain why ERP usage helps lower stock price crash risk: it improves the quality of internal control, reduces the chance of financial restatements, and mitigates information asymmetry, and all effects are concentrated in non-SOEs. Our study is among the first to examine how ERP usage affects stock price crash risk – an overall outcome measure of a firm's information environment. Using SOEs vs. non-SOEs as a powerful measure of the shareholder-manager agency problem and organizational rigidity, it also represents the first test of the moderating effect of agency problem and organizational rigidity on the effectiveness of ERP usage.

The impact of privatization of state-owned enterprises on innovation in China: A tale of privatization degree

Despite the massive privatization of state-owned enterprises (SOEs) in China, its impact on firm innovation remains poorly understood. Prior literature fails to capture some significant phenomena because it inappropriately measures SOE privatization as a dummy variable, which, in actuality, should be measured by “degree”. Using a unique Chinese Patent Census Database (1991–2018) to identify patent quality, we systematically investigated the impact of SOE privatization (as measured by privatization degree) on innovation (as measured by both patent quantity and quality). We found that first, SOE privatization significantly promotes innovation and has greater effects over the long term, mainly through reduced agency costs of firms. Our findings provide empirical support for the ongoing privatization of SOEs in China, and validates the managerial view of SOE theory. Second, unlike previous studies that only considered whether SOEs were privatized or not, we considered the degree of SOE privatization and obtained two novel findings: SOE privatization only promotes innovation when privatized firms are controlled by domestic non-state-owned capital, and progressive privatization benefits innovation more than radical privatization does. These findings reveal the preferred path and rate of SOE privatization. Third, the promotional effects of SOE privatization on innovation are greater for commercial SOEs, central SOEs, large SOEs, and SOEs in high-tech industries compared with their respective counterparts. These findings provide guidance for the different strategies for the privatization of various SOEs.

MECHANISMS FOR IMPROVING THE POLICY OF STATE ENTERPRISE MANAGEMENT ON THE EXAMPLE OF THE AUTONOMOUS REPUBLIC OF ADJARA AND MUNICIPALITIES

The world experience confirms that the state-supported / operating enterprises are often inefficiently managed, which is a precondition for statization and privatization of state-owned enterprises. The policy of the state towards insolvent enterprise implies to conduct bankruptcy-liquidation procedures, however, at the same time, the establishment of the state-supported entrepreneurial entities is underway. The most state-owned enterprises are unprofitable enterprises, which are also characterized by a very low degree of accountability, which in turn prevents formation of an optimal business strategy. The main purpose of this paper is to study the mechanisms for improving the management policy of the enterprises owned by the Autonomous Republic of Adjara and municipalities and to develop proposals for its further implementation in practice. The theoretical significance of the paper lies in the fact that the results of its main research can be used to further improve the legislative and normative acts in the field of management policy of the existing, as well as state-supported enterprises and enterprises supported by the Autonomous Republic of Adjara and municipalities, and the practical significance is reflected in the fact that the results, conclusions and proposals obtained in the process of researching the paper can be used directly in the field of management of the existing, as well as state-supported enterprises and enterprises supported by the Autonomous Republic of Adjara and municipalities.

Privatization of SOEs a Shift from Protectionism and a Factor of Economic Growth

In the framework of economic development, we argue that privatization of State Owned Enterprises (SOEs) is unarguably one of the gateways to succeeding in economic growth. It provides the basis for perfect market competition, promoting employment, reducing government expenditure burden on its budget, promoting employment growth and provides efficient services, boost innovation and the technological revolution of especially developing countries which is an undisputable evidence for economic growth seen for example in Asia and China to be specific. China and a good number of countries with perfect market structures, early economic successes can be largely accredited to privatization of their underperforming SOEs model of promoting economic growth. In this article, we will attempt to draw the attention of readers on the conjectural background of privatization of SOEs, its effects in promoting economic growth and strategies of its implementation drawing from the experiences of other countries. We used descriptive analysis approach to describe the facts and effects about the significance of privatization of SOEs in economies that are opening up or still moving up the economic development ladder. The paper also draws lessons from developed economies like the US where privatization is a symbol of a capitalist and free market society, although focusing on developing countries with specific reference to Sierra Leone, bench marking the case of China. We discovered that privatization helps government save more and improve efficiency largely through competition that motivates development as well as innovation.

Inequality, Privatization, and Democratic Institutions in Developing Countries

Privatization of state-owned enterprises in low- and middle-income countries is regarded as an indispensable first step for the consolidation of national accounts, the development of financial markets, and the improvement of firms’ efficiency. However, privatizations may also have a relevant distributional impact, particularly in developing countries, where proceedings from privatization may be a sizable resource for redistribution. This article is a first attempt to investigate the relationship between privatization and income inequality, focusing on the role of democratic institutions. We find that an increase in privatization proceeds is correlated with a reduction in income inequality in countries where representative political institutions are mature.

The Effects of Exports, FDI, and Innovation Competence on the Efficiency and Profitability of Privatized SOEs in China

Purpose – This study investigates the effects of exports, foreign direct investment (FDI), and innovation competence on the efficiency and profitability of privatized Chinese state-owned enterprises (SOEs). Design/Methodology/Approach – We apply fixed effects regressions after estimating the corporate efficiency using data envelopment analysis (DEA) methodology by industry around privatization. We use a panel dataset of Chinese listed firms from 2009 to 2017, with 10,950 year-firm data of RESSET and China Stock Market & Accounting Research (CSMAR) databases. To reflect the complicated relationships between exports, FDI, innovation competence, efficiency, and profitability of privatized firms, we apply simultaneous equations models. Findings – First, the privatization of SOEs in China improves their innovation competence, measured in the number of patents, overall corporate efficiency, and firms’ exports. Second, the innovation competence of firms improves their corporate efficiency and exporting capability, but it aggravates their profitability. Moreover, research and development (R&D) expenditures improve their innovation competence and return on assets, but these expenditures aggravate their efficiency and exports. Third, the corporate efficiency of privatized SOEs improves their profitability for 5 years after privatization, including the year. Fourth, exports have inverse U-shaped effects on efficiency and return on assets, and on their innovation competence. Fifth, overseas direct investments have inverse U-shaped effects both on innovation competence and efficiency and return on assets, whereas their effects on exports are not significant. Sixth, the positive effects of privatization on corporate profitability and such U-shaped effects of exports on corporate profitability last for one year after privatization, whereas the U-shaped effects of FDI last for 3 years. Research Implications – The privatization of Chinese SOEs has successfully improved their technological efficiency and profitability for a short time, which turns adversely afterward. The results imply that privatized firms need improvements in the efficiency of technological innovation and R&D investments for longer-term improvements in profitability and global competitiveness.

The “public body” enquiry in WTO disputes: implications for partial privatization

PurposeThis paper aims to question the “conventional” privatization of State-owned enterprises (SOEs) and to propose the neutral position adopted by the Dispute Settlement Body (DSB) to reconcile the divergent views within the World Trade Organization (WTO) regime.Design/methodology/approachChina’s partially privatized SOEs have raised numerous attention in WTO disputes regarding whether China's way of social and economic reform is consistent with its accession commitments and with WTO rules, in particular subsidy rules. Instead of providing a definite legal standard applicable to the “public body” enquiry, the DSB adopts the neutral position to reconcile the divergent views between developed and developing countries on whether not fully privatized SOEs constitute “public body.”FindingsAlbeit with interpretative vagueness, the value of DSB’s neutral position lies in its adequacy: first, the adequacy to address the complexity of SOE privatizations in developing countries; second, the adequacy to engage relevant parties to maintain the multilateral trading system; and third, not to impose specific impact on justification of countervailing duties.Originality/valueThis paper captures the recent developments in “public body” enquiry and calls for a compromised approach to maintain the WTO-like multilateral trade regime and to allow for more policy spaces for developing countries that best fit their unique circumstances and needs. It sees new and significant information, in the sense that the paper aims to present why China’s partial privatization benefits from the WTO “neutrality” on the subject.

Incorporation of Privatization Commission of Pakistan and the Impact of Privatization of SOEs on the Economic Conditions of Pakistan

Privatization is an initiative or process in which the selling-off of the state owned enterprises (SOEs) occurs. This process can also be seen when the government of a certain country contract outs the state services. Pakistan, as one of the developing country in the world enjoys a specific status due to its geographical locations, does not stand as a nation that participates unduly in privatizing the government assets. Today, despite the government's urge, some unforeseen circumstances and incidents that happen in Pakistan are not to attract the foreign direct investment from the investors, who desire to invest in SOEs. The aim of this research is to explain the impact of the incorporation of Privatization commission of Pakistan and the impact of selling-off of SOEs on the economic growth of the country and on other macroeconomic indicators. The data has been collected from different articles and from the government released statistics keeping in view the reviews of international organization such as World Bank and International Monetary Fund (IMF), catering the time period from 1991 to 2018. The figures of revenue from the sale of SOEs in different time periods are taken from the annual report of 2018 from the ministry of Privatization and could be relied upon. The research study has found a consistent rise, over the period of time, in rate of GDP, while the floats of privatization remained unsteady.