State-owned Enterprises Profitability Research Articles

Review of Asset Management Practice in Indonesian State-Owned Enterprise

This study examines Indonesian State-Owned Enterprises (SOEs) asset management methods, problems, and financial and operational performance effects. The report synthesizes case studies and academic research on how large organizations manage their huge and diverse asset portfolios and how governance, regulatory frameworks, and human resource practices affect their effectiveness. The research begins with case studies of talent management innovations from big Indonesian SOEs. These cases show how proactive human resource approaches can boost company commitment and reduce turnover, improving asset management efficiency. According to the research, governance and legal frameworks influence asset management techniques. Studies show that corporate governance quality affects SOE operational performance. The paper explores how reforms and legislation affect state asset management, highlighting the major changes in SOE governance and legal frameworks, particularly after economic and political reforms. Asset management difficulties for Indonesian SOEs include managing large and diverse asset portfolios, integrating modern management frameworks, and optimizing state asset revenue. According to the study, comprehensive asset management systems, governance transparency, and professional management can address these difficulties. The research examines how asset management strategies affect Indonesian SOE profitability, corporate governance, and performance measures. Strategic asset management boosts financial performance, especially profitability. SOE profitability is greatly affected by current asset and liability management. The study offers advice to Indonesian SOEs and policymakers. Enhancing financial and operational performance requires comprehensive asset management, governance changes, and strategic innovation. These efforts boost Indonesia's economy, demonstrating the importance of asset management in SOE performance.

Determinan Rasio Keuangan dan Good Corporate Governance di Badan Usaha Milik Negara

The study is classification as a quantitative study intended to see if there is any impact between a financial ratio and good corporate governance on the profitability of State-Owned Enterprises. A total of 14 State-Owned Enterprises were used as research samples from 2016-2020. Microsoft Excel 2007 and E-views 9 were used to process data using regression data analysis methods that panel as an analysis technique and used by the 5% level. Research has shown that profitability has been significantly influenced by liquidity and the board of directors, while profitability has been not significantly influenced by leverage, independent commissioners, and auditing committees.
 Keywords: Financial Ratio, Good Corporate Governance, State-Owned Enterprises

Financial Ratio Analysis Of State-Owned Enterprises (Soe) In The City Of Palembang

This study aims to determine the solvency and profitability of State-Owned Enterprises (SOE) in the city of palembang. This study uses a quantitative descriptive approach. The population of this research is State-Owned Enterprises (SOE) and the sampling method was PT. Pupuk Sriwidjadja (Persero) and PT. Semen Baturaja (Persero) was period 2014-2018. The solvency ability of PT Pupuk Sriwidjadja (Persero), seen from the Debt to Asset Ratio and Debt to Equity Ratio, was in a bad condition from 2014-2018. Meanwhile, the ability of profitability to return on assets and return on equity has decreased period 2014-2018. The solvency ability of PT Semen Baturaja (Persero) seen from the Debt to Asset Ratio period 2014-2017 is in good condition. Meanwhile, in 2018 it was quite good and the Debt to Equity Ratio was in good condition in 2014-2018. Meanwhile, the ability of profitability to return on assets and return on equity has decreased period 2014-2018. The limitations of this study are of the many existing financial ratios, researchers only use the solvency and profitability ratios that represent each variable, the research period was only conducted for 4 years from 2014 to 2018, the sample used in this study is a state-owned company in the city of Palembang. The contribution of this research is related to the analysis of debt and income used by the Palembang city state-owned enterprises. Keywords: Solvency, Profitability, State-Owned Enterprises (SOE)

The oligarchization phenomenon of political power in Ukraine: from rise to decline

The article analyzes the oligarchization phenomenon of political power in Ukraine as a system of control by owners of large capital over state institutions. The formation of powerful national capital was facilitated by public opinion’s unacceptability of attracting foreign capital and the monetary form of privatization of state-owned enterprises. The negative attitude of the population to the consequences of privatization was used by the oligarchs to block institutional reforms, which led to the spread of corruption and manual methods of property redistribution. The collection of oligarchic rent from the profits of state-owned enterprises became an additional resource for the enrichment of large owners. The dependence of the state on the oligarchs was ensured by their total control over the sectors of the economy that provided the majority of revenues to the state budget. The oligarchs’ ownership of key mass media allowed them to manipulate public opinion, which blocked reform initiatives of the civil sector. This was facilitated by the socio-political division of Ukrainian society regarding the ways of the country's development. The decrease in the influence of large owners on the political life of Ukraine became possible due to the limitation of their mass media influence and the decline of their economic base under the conditions of the Russian-Ukrainian war. The process of de-oligarchization of political power in Ukraine is facilitated by the growth of social unity and trust in state institutions, the increase in the influence of the civil sector, and the economic support of Western countries.

The Influence of Government Intervention on Enterprise Profitability—Take Chinese Scale Industrial Enterprises as an Example

As one of the main actors of market economy, enterprises are easily affected by the external environment. Whether the external environment of government intervention affects the profitability of enterprises? Using the regression method of panel fixed effect to analyze the relevant data of scale industrial enterprises in Chinese 31 provinces and cities from 2011 to 2017, it found that government intervention has a negative effect on the improvement of the profitability of enterprises, and the negative effect of government intervention on the profitability of state-owned enterprises is far higher than that of private enterprises.

How Does Increased Private Ownership Affect Financial Leverage, Asset Quality and Profitability of Chinese SOEs?

This paper uses the “Chinese ownership reforms in 2013” as a natural experiment to test how increased private ownership affects financial leverage, asset quality and profitability of SOEs (state-owned enterprises). The PSM-DID model is conducted using the panel data of SOEs from 2010 to 2018. Results show that the increased private ownership can decrease financial leverage, while increase asset quality and profitability of SOEs. Specifically, it affects financial leverage negatively in the eastern and the central regions, promotes profitability in the eastern region, and the asset quality in the western region. Besides, the negative effect on financial leverage and positive effect on profitability in the competitive industry is much higher as compared to the monopoly industry. Furthermore, an increase in private ownership enhances asset quality in the monopoly industry more than the competitive industry. The study concludes the positive nexus between increased private ownership and corporate performance of SOEs which provides an insight for the Chinese government to further ownership reforms and for SOEs to improve financial performance.

Does Autonomy Matter in State Owned Enterprises? Evidence from Performance Contracts in India

AbstractEmpirical evidence on the effect of managerial autonomy on the performance of state‐owned enterprises (SOE) is surprisingly scant despite autonomy being a preferred reform instrument over partial privatization in many countries. Using longitudinal data on performance contracts of state‐owned enterprises in India, this paper finds that managerial autonomy is associated with significant increases in enterprise profitability and efficiency. Further, using India's unique reform experience where both managerial autonomy and partial privatization were pursued side by side, the paper finds that while the positive effects of autonomy continue post‐partial privatization, the effects of partial privatization on performance are ambiguous. Specifically, once autonomy is controlled for, partial privatization has a positive effect on SOE profitability only after it crosses a critical level of government disinvestment. The findings suggest that organizational reforms such as granting managerial autonomy can be an important policy instrument in improving SOE performance particularly in cases where governments are unable to make substantial disinvestments.

The impact of privatization policy on the economic performance of the Establishment in Sudan (Case Study on SATA Company)

The paper aims at identifying the general performance of the public institutions, their production efficiency, profitability and financial performance after transferring their ownership to the private sector. It also aims to clarify the efficiency of private sector institutions in employing their financial and human resources better than public sector institutions. This paper is based on the following hypotheses: Changing ownership leads to the promotion and increased commercial competition of state-owned enterprises, resulting in improved financial performance and productive efficiency. The profitability of state-owned enterprises is lower than the profitability of privately owned enterprises. Private sector organizations attract and use their financial and human resources more efficiently than public sector institutions. The paper used the descriptive and comparative analytical methodology in order to evaluate the performance of the company before and after its transfering to the private sector, the data is analyzed using various financial analysis tools such as profit and debt ratio and total return on assets. The Paper depends on many sources for data collecting such as interviews with the company adminstration, company workers, beside the secondary sources such as books, references, periodical, university theses and working papers. The paper included four axes which contain: introductory part, the Paper theortical frame work, privatization experience in the Sudan , in addition the case study before and after privatiztion, beside the results and recommendations. The Paper finding that privatization of the company realized some positive results such as the increase in the company rates of the profitability and the improvement of the efficiency of productivity, However from the other side it contributed in increase of unemployment ,and did not contribute positively neither to the national income nor to the improvement of balance of payments. Keywords: Privatization, economic reform, productive efficiency, structural adjustment, public sector, private sector.

Impact of Corporate Social Responsibility (CSR) Implementation on The Profitability of State-Owned Enterprises: An Analysis of 20 Listed Companies in Indonesia

The purpose ofthis research is to prove that State-Owned Enterprises (SOEs) that invest in CSR will optimize proit in the hope that thesatisfaction of stakeholders is reached effectively. This paper is a quantitative analysis of an exploratory approach. Discusses theimplementation of CSR from 20 state-owned companies is go public companies. This analysis is based on the Global Reporting Initiativereport which provides some aspects of sustainability.The reports were taken from the availability both CSR and inancial data.The nextstep is to look at the EPS trend of these SOEs and comparing to those aspects are applied. The restrictions coverage of this paper is only for20 state-owned companies which listed in Indonesia.In this research proves that the implementation ofCSR has not yet become the burdenofSOEs but can also give the proit growth ofthose SOEs. Where there is a positive relationship between the implementation of CSR and theEarning Per Share (EPS) with coeficient correlation (R) is 0.110, even the tendency ofincreasingly integrated CSR programs grow the proitof SOEs. There is the theoretical implication to management science that the implementation of CSR is not a burdening cost but is aninvestment and CSR is one ofmany ways for companies to increase business competitiveness in the present era. Also, there is themanagerial implication that by implementation CSR is very important to have a mutual beneit between society and corporation while SOEsstill can optimize some proit. This understanding is essential as a high concentration in social and corporate relations in modern times.

Recasting the Iron Rice Bowl: The Reform of China's State-Owned Enterprises

Following the enactment of reforms in the mid-1990s, China's state-owned enterprises (SOEs) became more profitable. Using theoretical insights from Azmat, Manning, and Van Reenen (2012) and Karabarbounis and Neiman (2014) and econometric methods in De Loecker andWarzynski (2012), this paper finds that SOE restructuring was nevertheless limited. This is because SOE profitability gains in part reflect that they were under less political pressure to hire excess labor and also their cost of capital fell and their capital-labor elasticity of substitution generally exceeded unity. Moreover, SOE productivity lagged that of foreign and private firms.

Drivers of supplier-customer relationship profitability in China: Assessing International Joint Ventures versus State Owned Enterprises

Business relationship performance depends on the context(s) in which the relationship is being conducted, including the cultural context and the nature of the organizations participating in them. Here, we examine the drivers of performance in Chinese supplier-customer relationships for two types of Chinese suppliers - International Joint Ventures (IJVs) and State Owned Enterprises (SOEs). The results indicate there are marked differences in the links between relationship drivers and perceived relationship profitability for these different types of suppliers. The profitability of SOEs' customer relations is associated with ongoing personal and hierarchical linkages, whereas for IJVs, it is associated with interactive product adaptation and production planning. Drivers with significant associations for both types of suppliers include relational quality and financial exchange factors. This research has implications for the ongoing management of international supplier-customer relationships, Chinese government policy with regard to SOEs as well as the inclusion of organization types as a consideration for business marketing relationship and value creation theory.

Reforming China’s State-owned Enterprises

Analysis by Agatha Kratz based on:- Lin Yongsheng, (1) Working out once again the efficiency of SOEs, Xin shiji, 13 August 2012.- Zhang Wenkui (2) interviewed by Wang Xiaobing, Reforming state-owned enterprises represents the next opportunity for growth, Xin shiji, 20 July 2012 (interview conducted in June, before the publication of July's economic figures).- Sheng Hong!3) interviewed by Chen Cai, Public shareholding has lost its halo of virtue, Licaiyizhoubao, 27 November 2011.- Sheng Hong interviewed by Wang Daojun, Private enterprises have the right of access to all markets, Dongfang zaobao, 15 May 2012.On the eve of the 18th Congress of the Chinese Communist Party (CCP), the Chinese press was publishing an increasing array of articles setting out details of the reforms to be undertaken by the new leadership. A number of these discussions focused on state-owned enterprises (SOEs).!4) Among these contributions are those of Lin Yongsheng and Zhang Wenkui, both of whom are advocates of root-and-branch reform of the system of state-owned enterprises. In addition to these two noticeably critical contributions, we offer two interviews with Sheng Hong, a highly controversial figure in the overall debate on SOEs.A significant contribution of SOEs to the Chinese economySheng Hong begins his piece by recalling that in 2011 the gross aggregate income of Chinese public companies reached 30,3 billion yuan, that is, 64 percent of China's GDP for the year.® Hence, these companies, whose capital is largely if not wholly under state control, represent a considerable portion of China's economy. Lin explains that although the weight of these companies has gradually been reduced within the economy, ever since the reforms of the 1970s, they still account for 30 percent of all Chinese companies.!7) This spread is very uneven, however, since in some sectors, such as everyday consumer items, these companies represent only 50 percent of invested capital, whereas in certain strategic sectors - such as industries to do with the military, telecommunications, energy, etc. - they represent nearly 90 percent of capital invested.Sheng Hong points out that not all SOEs are comparable. Some are veritable industrial monsters, while others operate on quite a limited scale. This differentiation is reflected in their levels of profit. Some of these companies are perfectly viable, while others are experiencing financial difficulties.It is on this subject of the profitability of SOEs that Sheng Hong made his name. He reminds us that in 2011, his research centre, the Unirule (Tianze) Institute of Economics, published a damning report highlighting the economic inefficiency of these companies. Indeed, this report established that over the period 2001-2009, Chinese SOEs recorded an average annual rate of return of 8.16 percent. However, when the enormous state subsidies that these companies received were factored into the equation, their average annual rate of return fell spectacularly, to minus 6.29 percent. This figure shows the extent to which these companies are not economically viable, as well as the extent to which they are assisted by the government through various kinds of subsidies.Ongoing support to public companies within the political and academic arenasIn spite of these very poor figures, there are still many in favour of maintaining SOEs for a variety of reasons. Zhang explains that many people highlight the sustained growth of SOEs in the past, and their rather significant contribution to the country's development. But Zhang rejects this point of view, arguing that this contribution was in terms of volume and not return on investment. Lin notes that others are keen to preserve the state's capacity for action in certain key industries related to national well-being (guoji minsheng SL+Kife). …

Honor Thy Creditors Beforan Thy Shareholders: Are the Profits of Chinese State-Owned Enterprises Real?

Chinese state-owned enterprises (SOEs) have become quite profitable recently. As the largest shareholder, the state has not asked SOEs to pay dividends in the past. Therefore, some have suggested that the state should ask SOEs to pay dividends. Indeed, the Chinese government has adopted this policy advice and started to demand back dividend payments starting from 2008. Although we do not question the soundness of the dividend policy, the point we raise is whether those profits are real if all costs owed by SOEs are properly accounted for. Among others, we are interested in investigating whether the profits of SOEs are still as large as they claim if they were to pay a market interest rate. Using a representative sample of corporate China, we find that the costs of financing for SOEs are significantly lower than for other companies after controlling for some fundamental factors for profitability and individual firm characteristics. In addition, our estimates show that if SOEs were to pay a market interest rate, their existing profits would be entirely wiped out. Our findings suggest that SOEs are still benefiting from credit subsidies, and they are not yet subject to the market interest rates. In an environment where credit rights are not fully respected, dividend policy, though important, should come second and not first.

Consumption, Income Distribution, and State Ownership in the People’s Republic of China

It is income rather than the peculiar saving behavior of Chinese households that constrains consumption in the People’s Republic of China. The low share of consumption in gross domestic product (GDP) is consistent with the reduced share of GDP of wage earnings — a major source of household income. Corporate savings, which accounted for 23% of national income in 2007, contributed most to the significant increase in the gross national saving rate. The surging corporate savings was mainly due to the bias of income distribution toward capital. The profits of state-owned enterprises (SOEs) made with monopolistic power and government support comprises a substantial part of corporate savings. A series of enterprise reforms have made SOEs leaner and bigger, and transformed a handful central SOEs into monopolies in highly profitable industries. Retained profits by SOEs only benefit managers and employees in these firms, not the general public who are their true owners. The empirical analysis indicates that high levels of compensation by SOEs contributed to rising inter-industry income disparity. To boost domestic demand, it is essential that the government address the bias in distribution between SOEs and households. Collecting dividends from SOEs to fund social welfare systems or direct income transfers to low-income families will reduce the gross national saving rate, boost consumption, and more importantly, mitigate social inequality.

Honor Thy Creditors Beforan Thy Shareholders: Are the Profits of Chinese State-Owned Enterprises Real?

The Chinese state owned enterprises (SOEs) have become quite profitable recently. As the largest shareholder, the state has not asked SOEs to pay dividends in the past. Therefore, some have suggested that the state should ask SOEs to pay dividends. Indeed, the Chinese government has adopted this policy advice and started to demand dividend payment starting from 2008. While we do not question the soundness of the dividend policy, the point we raise is whether those profits are real if all costs owned by SOEs are properly accounted for. Among other things, we are interested in investigating whether the profits of SOEs would still be as large as they claim if they were to pay a market interest rate. Using a representative sample of corporate China, we find that the costs of financing for SOEs are significantly lower than for other companies after controlling for some fundamental factors for profitability and individual firm characteristics. In addition, our estimates show that if SOEs were to pay a market interest rate, their existing profits would be entirely wiped out. Our findings suggest that SOEs are still benefiting from credit subsidies and they are not yet subject to the market interest rates. In an environment where credit rights are not fully respected, dividend policy, though important, should come second and not first.

A Re-examination of China's Share Issue Privatization: Does it Not Improve SOE Profitability?

Previous studies (e.g., Sun and Tong, 2003; Wang et al., 2004) show that Share Issue Privatization (SIP) in China did not improve the profitability of State-owned Enterprises (SOEs). This is puzzling given that SIP improves firm profitability almost around the world and China's economic reform is widely recognized as a success. We argue that these studies did not consider the mean reversion nature of corporate profitability. In China, only SOEs with the highest profitability are chosen to privatize. After SIP, the high profitability reverses to the average level so that SIP firms will have negative profitability changes. We design a matched sample method to deal with the mean reversion problem. For a sample of 149 SIP firms, we select matching firms from a large sample of non-SIP SOEs, according to the pre-SIP firm size and profitability. We find that SIP substantially improves firms' profitability relative to the matching firms. Our results are consistent with the theory and carry important policy implication for the China's reform of SOEs.

The Impact of Competition and Labor Remuneration on Profitability in China's Industrial State-owned Enterprises

China's industrial state-owned enterprises (SOEs) have seen a secular decline in profitability throughout the reform period. Barry Naughton argues that this decline was in large part due to a decline in monopoly rents as competition with enterprises in other ownership forms increased. Fan Gang and Woo Wing-Thye, on the other hand, contend that profitability declined across all sectors independent of the degree of competition, and that excessive labor remuneration accounts for the broad decline in SOE profitability. Testing the two hypotheses with aggregate sectoral and provincial data from the mid-1980s to the late-1990s, neither appears convincing. Yet at closer inspection these are not competing hypotheses. The two causes affect overall profitability through different channels. Competition and labor remuneration have a highly significant impact on intermediate profitability measures that take the two channels into account separately. Together they explain most of the variation in overall profitability.

Long live China’s state-owned enterprises: deflating the myth of poor financial performance

China’s industrial state-owned enterprises (SOEs) are commonly perceived as performing poorly. This leads authors to conclude that SOE reform so far has been a failure, and to recommend all-out privatization. Industrial SOE profitability indeed declined drastically in the course of the reform period, and industrial SOEs are always less profitable than industrial non-SOEs. However, the gap between SOEs and non-SOEs can be explained by just two factors: SOEs face higher circulation tax rates than non-SOEs, and have a higher capital intensity. In as far as these are the result of government policies and historical factors discriminating against SOEs, privatization of SOEs may improve these enterprises’ profitability levels, but privatization is not a necessary condition. The decline in SOE profitability over time furthermore is well explained by economic transition factors; non-SOE profitability declined following a similar time pattern, and non-SOEs are no better suited to withstand shocks such as the 1989–1990 economic downturn.

The Economic Performance of China's State-owned Industrial Enterprises

The much-publicized declining financial performance of China's state-owned enterprises (SOIEs) is generally assumed to be evidence of their worsening economic efficiency. However in this paper we show that during 1980-1996, total factor productivity actually increased at an average annual rate of 1.90% and was responsible for 41% of the rise in SOIE output. The decline in financial performance can be attributed to their terms of trade deteriorating at an average annual rate of 3.19% due to increased competition and price reform. Numerous other factors, apart from economic efficiency, can further explain why the level of SOIE profitability has lagged behind non-state-owned industrial enterprises. While these conclusions do not imply that SOIEs have become efficient by international standards, they do suggest that their economic performance was significantly better than is generally claimed. They also confirm the need to evaluate economic performance directly, using criteria appropriate to the Chinese context.