A Comprehensive Evaluation Framework on the Economic Performance of State-Owned Enterprises

Farhad Taghizadeh-Hesary (), Naoyuki Yoshino (), Chul Ju Kim and Aline Mortha
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Chul Ju Kim: Asian Development Bank Institute

No 949, ADBI Working Papers from Asian Development Bank Institute

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, which is especially pronounced in countries where these 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. By employing the principal component analysis technique and using data of 1,148 SOEs, mostly from European countries, we provide a more comprehensive framework for assessing SOE performance, which includes various 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 than profitability. Focusing on profitability as the sole assessment criterion will mislead policy makers, keeping in mind also that the nature of many SOEs is to generate social welfare and not profit.

Keywords: state-owned enterprises; SOEs; performance assessment; public economics (search for similar items in EconPapers)
JEL-codes: H11 L32 P11 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2019-05-10
New Economics Papers: this item is included in nep-bec, nep-eff, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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