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Development vs. political views of government ownership: How does it affect investment efficiency?

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  • Ghazali, Ahmad
  • Khaw, Karren Lee-Hwei
  • Zainir, Fauzi Bin

Abstract

This study connects the development view and political view of government ownership with the firm life cycle theory to explain firms’ investment efficiency. We find that government ownership of firms in the introduction and decline stages is driven by the development view that improves investment efficiency. However, consistent with the political view, higher government ownership worsens firms' investment efficiency in the growth and mature stages. For firms in these two stages, we also find a significant threshold effect of government ownership on investment efficiency. Our results imply that the government's participation objective is different based on the firms’ development stages.

Suggested Citation

  • Ghazali, Ahmad & Khaw, Karren Lee-Hwei & Zainir, Fauzi Bin, 2022. "Development vs. political views of government ownership: How does it affect investment efficiency?," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322002720
    DOI: 10.1016/j.frl.2022.103034
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    More about this item

    Keywords

    Government ownership; Investment efficiency; Firm life cycle; Development view; Political view;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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