Strategic State Ownership

60 Pages Posted: 27 Oct 2012 Last revised: 31 Aug 2017

See all articles by Richard W. Carney

Richard W. Carney

China Europe International Business School (CEIBS)

Travers Child

China Europe International Business School (CEIBS)

Wai-Man Liu

Australian National University

Phong T. H. Ngo

Australian National University (ANU)

Date Written: August 26, 2017

Abstract

Much existing work on SOEs portrays state ownership as suboptimal relative to private ownership and inevitably declining over time. By contrast, we argue that SOEs have become durable fixtures of the global economy as governments strategically smooth firm performance in economically important enterprises via changes to their ownership positions. We test our hypotheses with a new dataset spanning 16 years and 9 East Asian economies, totaling 2,984 firm-year observations. Our findings show that firm underperformance leads to an increase in state ownership, which in turn improves performance, and is followed by the state reducing its ownership stake. We argue this behavior stems from the desire of incumbent leaders to prevent economic problems from becoming political problems that could threaten their rule.

Keywords: government ownership, firm performance, direct ownership, indirect ownership, politics

JEL Classification: G01, G34, G38, H11, H12

Suggested Citation

Carney, Richard W. and Child, Travers and Liu, Wai-Man and Ngo, Phong T. H., Strategic State Ownership (August 26, 2017). Available at SSRN: https://ssrn.com/abstract=2167141 or http://dx.doi.org/10.2139/ssrn.2167141

Richard W. Carney

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Travers Child

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Wai-Man Liu

Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

HOME PAGE: http://https://www.cbe.anu.edu.au/about/staff-directory/?profile=Wai-Man%20(Raymond)-Liu

Phong T. H. Ngo (Contact Author)

Australian National University (ANU) ( email )

RSFAS, College of Business and Economics
Australian National University
Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 1079 (Phone)

HOME PAGE: http://cbe.anu.edu.au/people/rsfas/phong-ngo/

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