Demystifying the Role of a State Ownership in Corporate Governance and Firm Performance
Author | : Amran Rasli |
Publisher | : |
Total Pages | : 0 |
Release | : 2013 |
ISBN-10 | : OCLC:1376011700 |
ISBN-13 | : |
Rating | : 4/5 (00 Downloads) |
Download or read book Demystifying the Role of a State Ownership in Corporate Governance and Firm Performance written by Amran Rasli and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this research is to examine the role of state ownership in corporate governance and firm performance. We employed ordinary least squares and two-stage least squares regressions to analyze the effects of state ownership on firm performance. We go beyond existing research on state ownership by carefully disentangle investment objectives of state-controlled financial institutions. Such state ownership can be classified as profit-oriented and non-profit-oriented, in which the former consider return on investment to be the primary investment objective, whereas the latter prioritizes socio-economic development. We found that profit-oriented state ownership is an effective corporate governance mechanism and provides political patronage to the firm in the form of firm's specific resources and credit financing. Although nonprofit-oriented state ownership firms also receive similar political patronage, they tend to be associated with inefficiencies such as the free-rider problems, bureaucracies and political intervention in firm management. We conclude that state ownership consists of heterogeneous entities with respect to corporate governance and firm performance.