The value of government ownership during the global financial crisis

Beuselinck, Christof; Li-hong, Cao; Deloof, Marc; Xia, Xinping

doi:10.1016/j.jcorpfin.2015.05.002

Cited by 88 publications

(61 citation statements)

References 71 publications

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“…With a more decentralized, independent regulatory framework, governments have much less leeway to transfer rents from SOEs—for instance, by controlling prices or investing in unprofitable projects—if these actions harm investors, distort markets, or benefit selected constituencies only (Bortolotti, Cambini, & Rondi, ). Also, even if SOEs can benefit from patient state capital (Beuselinck et al, ), SOEs from developed countries usually have more access to external capital, domestically or abroad. Thus, institutional development should reduce not only the costs but also the benefits of state ownership.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

“…Thus, instead of looking for generic differences between SOEs and private firms, scholars should pay more attention to changes that increase the temptation of governments to intervene, as well as local institutional constraints on their ability to influence SOEs. This findings are consistent with those of the recent literature looking at valuation and stock returns in SOEs in Asia and Europe during the financial crisis in that minority SOEs seem to fare better than private firms during times of crisis, especially in countries with institutions that prevent government intervention in SOEs (Beuselinck et al, ; Boubakri et al, ). Yet, our results also diverge from some of those recent studies because we measure performance and valuation using a database that covers many more countries.…”

Section: Introductionmentioning

confidence: 99%

“…Moreover, there is a literature that finds that post-privatization residual ownership affects corporate governance (Borisova, Brockman, Salas, & Zagorchev, 2012;Guedhami, Pittman, & Saffar, 2009), the cost of capital (Borisova & Megginson, 2011), valuation (Boubakri, El Ghoul, Guedhami, & Megginson, 2018), and innovation (Cao, Cumming, Zhou, & Zhou, 2016;Lazzarini, Mesquita, Monteiro, & Musacchio, 2016;Zhou, Gao, & Zhao, 2017). Beuselinck, Cao, Deloof, and Xia (2017) explore the impact that the Financial Crisis of 2008-2009 had on the valuation and stock returns of European SOEs relative to similar private firms. They find that SOEs experienced a less severe fall in stock prices and market-to-book value than private firms, but only in countries with strong investor protections.…”

Section: Introductionmentioning

confidence: 99%

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State ownership reinvented? Explaining performance differences between state‐owned and private firms

Lazzarini

Musacchio

2018

Corporate Governance

115

137

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Manuscript Type Empirical Research Question/Issue This study aims to understand the implications of the corporate governance arrangements in state‐owned enterprises (SOEs) that are publicly listed in terms of firm performance relative to that of private firms. Research Findings/Insights Using a new database of 477 large, listed SOEs observed between 1997 and 2012 in 66 developed and emerging countries, we use matching techniques to show that these firms do not underperform similar private firms, except when the former face shocks that prioritize their social and political objectives, such as during severe recessions. These findings demonstrate the need to revise existing theories of SOE underperformance. Theoretical/Academic Implications We expand the traditional agency view of SOEs by introducing principal–principal conflicts that prevail in publicly traded firms. We argue that governments try to steer SOEs to pursue social and political objectives, which can lead to inefficiencies, but they also provide them rents and protection, factors that should lead them to perform as well or better than similar private firms. Thus, our theory of state ownership argues that their advantage or disadvantage over similar private firms cannot be identified from the theory and thus needs an empirical test. Practitioner/Policy Implications We modify the simplistic view that SOEs are inefficient and highlight that SOEs that compete with private firms may have advantages that give them a competitive edge. This has implications not only for firm‐level strategy, but also for competition policy worldwide.

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Section: Theory and Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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State ownership reinvented? Explaining performance differences between state‐owned and private firms

Lazzarini

Musacchio

2018

Corporate Governance

115

137

View full text Add to dashboard Cite

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“…Meanwhile, family and public ownership influences the bank performance (Zouari and Taktak, 2014) [25]. Furthermore, firms that have government ownership increase their value (Beuselinck et al, 2017) [26].…”

Section: Brief Literature Review and Hypotheses Board Effectivenessmentioning

confidence: 99%

Panel data analysis of ownership structure and board effectiveness influence on GCC bank performance

Bajrei¹,

Ismail²,

Nor³

2018

EA-XXI

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This study aims to analyze the influences of board directors' effectiveness and ownership on bank performance among the six Gulf Cooperation Council (GCC) countries: Saudi Arabia, UAE, Oman, Kuwait, Bahrain, and Qatar. Five hypotheses were singled-out for further approbation. Unbalanced secondary panel data were collected from 68 banks with a total of 268 observations for the period 2012-2015. During this period, the economy of GCC was experiencing the fall of oil price that resulted in low GDP, increase fiscal deficit, reduction of banks reserves and decline in banks' profitability and the share prices. These were the critical years to the banks in GCC countries as their performance was crucial. Besides facing diplomatic crisis in the following years, GCC countries strived to improve their financial sector. Secondary data was obtained from banks' annual reports, websites of stock exchange and Thomson Reuters Datastream. The findings revealed a significant association between board of directors' effectiveness, government-owned banks, and GCC national ownership with the banks' performance. Findings also showed the best board structure for banks and the need to unify the regulations among the six countries. As for the policymakers, the outcome of this study might indicate needed reconsideration of the legal infrastructure and facilitates of investment as well as signal to management, investors and auditors the best ways to invest and control the banks. The outcome may help to enhance closer ties among the GCC countries.

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“…On the other hand, government connections may bring benefits to firms under its control by providing them with rents and protection such as implicit bailout guarantee, preferential access to credit and government-related contracts (Kornai et al 2003;Borisova et al 2015). Given the theoretical benefits and costs of government intervention, there is significant conflicting evidence in the literature on the relationship between government control and firm value (Boubakri et al 2005;Chen et al 2009;Liu et al 2012;Beuselinck et al 2017;Boubakri et al 2018).…”

Section: Introductionmentioning

confidence: 99%

Government control and the value of cash: evidence from listed firms in China

Wang

2020

Rev Quant Finan Acc

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In this paper, we investigate the impact of government control on investors' valuation of cash held by listed firms in China. We find strong and robust evidence that government control leads to a lower value of cash. Further evidence suggests that this negative impact is associated with significant agency costs of political expropriation rather than low financial constraints of the soft-budget effect. Moreover, our extended analyses reveal that the negative impact of government control on the value of cash depends on regional institutional development. In particular, in regions with high institutional development, government control reduces the value of cash, while in areas that are less developed, this negative impact is attenuated to some extent. Overall, our findings shed new light and add a further dimension to the literature, broadening our understanding of the impact of government intervention on the listed firms under its control.

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The value of government ownership during the global financial crisis

Abstract: Our results also suggest that government ownership can help overcome crisis shocks only in an environment with low risk of expropriation by the government.

Cited by 88 publications

References 71 publications

State ownership reinvented? Explaining performance differences between state‐owned and private firms

State ownership reinvented? Explaining performance differences between state‐owned and private firms

Panel data analysis of ownership structure and board effectiveness influence on GCC bank performance

Government control and the value of cash: evidence from listed firms in China

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