Company performance and reputation risk in state-owned Italian listed companies

Abstract

The relationship between ownership structure (private vs State-owned) and company performance has been deeply analyzed by scholars and practitioners. Prior studies found mixed results about this topic; some scholars demonstrated that private firms perform better than State-Owned Enterprises (SOEs) and others came to opposite or undefined results. Further, during the global financial crisis, this topic gained relevance. To our best knowledge, Italian framework suffers of a lack of these studies and, in particular, no ones focused on the level of reputation risk in both SOEs and private firms. Aim of this paper is to analyse the difference in the performance and in the reputation risk between Italian SOEs and private firms. To do so we performed a t-test analysis on a sample of 18 State-owned listed firms and 212 private listed firms. Our empirical results found that SOEs have higher ROE and higher Cash flow/sales, but a lower Tobins’ Q than private firms. Further, no statistically significant differences in the reputation risk have been found; therefore financial analysts do not perceive any difference in the reputation risk between private and SOEs. Our results can help practitioners and policy-makers in making investment decisions and choices about the privatization process.