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Demystifying the role of a state ownership in corporate governance and firm performance: evidence from the manufacturing sector in Malaysia

Md. Rasli, Amran and Chin, Fei Goh and Khan, Saif-Ur-Rehman (2013) Demystifying the role of a state ownership in corporate governance and firm performance: evidence from the manufacturing sector in Malaysia. Zbornik Radova Ekonomskog Fakultet Au Rijeci, 31 (2). pp. 233-252. ISSN 1331-8004

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Official URL: https://ideas.repec.org/a/rfe/zbefri/v31y2013i2p23...

Abstract

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

Item Type:Article
Uncontrolled Keywords:corporate governance, firm performance, institutional ownership, ownership structure, state ownership
Subjects:H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:Management
ID Code:49204
Deposited By: Siti Nor Hashidah Zakaria
Deposited On:02 Dec 2015 10:08
Last Modified:27 Sep 2018 12:07

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