Responding to Financial Crisis: The Rise of State Ownership and Implications for Firm Performance

Richard W. Carney, Liu, Wai-Man (Raymond) and Phong Ngo

MPRA Paper from University Library of Munich, Germany

Abstract: We examine changes to corporate ownership in nine East Asian countries following the 1997 Asian Financial Crisis. Countries with lower incomes and in which policy making involves greater transactions costs (i.e., veto points) have more firms with state ownership. Partial state ownership appears to be effective insurance against crisis. Firms with minority state ownership exhibit 5% (annualized) lower idiosyncratic volatility in the quarter of the Lehman Brothers collapse than firms with either no or dominant state ownership. Minority state-owned firms also enjoy a higher abnormal return of 3.7% and 6.1% in the two quarters following the collapse of Lehman Brothers.

Keywords: financial crisis; government ownership; veto players; insurance; corporate performance (search for similar items in EconPapers)
JEL-codes: G10 G34 G38 H11 (search for similar items in EconPapers)
Date: 2012-10-26
New Economics Papers: this item is included in nep-bec, nep-hme and nep-sea
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