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

Author

Listed:
  • Farhad Taghizadeh-Hesary

    (Asian Development Bank Institute)

  • Naoyuki Yoshino

    (Asian Development Bank Institute)

  • Chul Ju Kim

    (Asian Development Bank Institute)

  • Aline Mortha

    (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.

Suggested Citation

  • Farhad Taghizadeh-Hesary & Naoyuki Yoshino & Chul Ju Kim & Aline Mortha, 2019. "A Comprehensive Evaluation Framework on the Economic Performance of State-Owned Enterprises," ADBI Working Papers 949, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0949
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    References listed on IDEAS

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    Cited by:

    1. Yixuan Duan & Min Guo & Yixuan Huang, 2022. "Leverage of Local State-Owned Enterprises, Implicit Contingent Liabilities of Government and Economic Growth," Sustainability, MDPI, vol. 14(6), pages 1-23, March.
    2. Keun Jung Lee, 2021. "The Effects of Privatization and Corporate Governance of SOEs in Transition Economies: The Case of Kazakhstan," ADB Institute Series on Development Economics, in: Farhad Taghizadeh-Hesary & Naoyuki Yoshino & Chul Ju Kim & Kunmin Kim (ed.), Reforming State-Owned Enterprises in Asia, chapter 0, pages 113-132, Springer.
    3. Ting Zhu & Tan Li, 2024. "Import competition, state‐owned enterprise prevalence and employment: Evidence from China," The World Economy, Wiley Blackwell, vol. 47(6), pages 2515-2535, June.
    4. Eduardo Levy Yeyati & Juan Negri, 2023. "State-owned enterprises: in search for a new consensus," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 26(1), pages 82-96, January.
    5. Eduardo Levy Yeyati & Juan Javier Negri Malbran, 2022. "State-owned enterprises: In search for a new consensus," School of Government Working Papers 20220401, Universidad Torcuato Di Tella.

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    More about this item

    Keywords

    state-owned enterprises; SOEs; performance assessment; public economics;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform

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