A Comprehensive Evaluation Framework on the Economic Performance of State-Owned Enterprises
Taghizadeh-Hesary, Farhad; Yoshino, Naoyuki; Kim, Chul Ju; Mortha, Aline | May 2019
Abstract
State-owned enterprises (SOEs) play a key role in the economy of many countries. They are usually thought to be in charge of increasing social welfare. At the same time, their relatively low performance poses several problems, including slowing down economic growth. This effect is especially pronounced in countries where such firms represent a large share of the economy. Therefore, it is crucial for central governments to implement a comprehensive evaluation method to assess the performance of SOEs. Previous studies have offered many ways to evaluate their performance. By employing the principal component analysis technique and using data of 1,148 SOEs, mostly from European countries, our study aims at providing a more comprehensive framework for assessing SOE performance that includes various factors. We selected five factors: profitability, per capita productivity, per capita costs, debt due days, and solvency. The results of our empirical study show that solvency, per capita costs, and per employee productivity have more deterministic power over the success or failure of SOEs, compared to profitability. While profit making of SOEs is important, focusing on profitability as the solve assessment criterion will mislead policy makers, keeping in mind also that the nature of many SOEs is to generate social welfare and not profit.
Citation
Taghizadeh-Hesary, Farhad; Yoshino, Naoyuki; Kim, Chul Ju; Mortha, Aline. 2019. A Comprehensive Evaluation Framework on the Economic Performance of State-Owned Enterprises. © Asian Development Bank Institute. http://hdl.handle.net/11540/10209.Keywords
Governance
Good Governance
Political Leadership
Public Administration
Business Ethics
Governance
Corporate Governance Reform
Governance Approach
Governance Quality
Public Sector Projects
Public Sector Reform
Political Leadership
Political Power
Institutional Framework
Government
Government accounting
Government
Institutional Framework
Public Administration
Business Ethics
Political Leadership
Public enterprises
Public finance
Public enterprises
Bureaucracy
Cabinet system
Common good
Executive power
Government
Political obligation
Public management
Government accountability
Transparency in government
Political ethics
Government spending policy
Government services
Democracy
Democratization
Elections
Local government
Government business enterprises
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