The Financial Sustainability of State-Owned Enterprises in an Emerging Economy

Chee Loong Lee, Riayati Ahmad (), Wing Shing Lee, Norlin Khalid and Zulkefly Abdul Karim
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Chee Loong Lee: Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia
Riayati Ahmad: Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia
Wing Shing Lee: Department of International Business and Administration, I-Shou University, Dashu District, Kaohsiung City 840001, Taiwan
Norlin Khalid: Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia
Zulkefly Abdul Karim: Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia

Economies, 2022, vol. 10, issue 10, 1-13

Abstract: When the government creates state-owned enterprises (SOEs), one of the primary purposes is to reduce its financial burden in the long run, also called financial sustainability. Nonetheless, previous research has pointed out that SOEs struggle to achieve financial sustainability due to government intervention. In this study, we examine the relationship between the financial sustainability of SOEs and government intervention in Malaysia. We take a novel approach, using share ownership to measure government intervention. Our results show that the threshold effect of government ownership on financial sustainability in Malaysia is around 27%. The findings prove that the SOEs of an emerging country could reach financial sustainability only if the government ownership is below the threshold. Finally, this study discusses the policy implications of our findings for SOEs. The government of Malaysia should propose a road map to gradually reduce its ownership of SOEs below the threshold.

Keywords: financial sustainability; state-owned enterprises; emerging economies; government ownership; threshold effect (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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