Academy of Finance,

Hanoi, March 07, 2019

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank Institute
(ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in
this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

Performance Differential Between Private and

State-owned enterprises:
The Analyses of Profitability
and Solvency Using a Global Sample

Nguyet Thi Minh Phi1, Farhad Taghizadeh-Hesary2,Tu Chuc Anh1, Naoyuki Yoshino3, Chul Ju Kim4

1Academy of Fi nance, Hanoi , Vi etnam; 2Waseda Uni versi ty, Tok yo, Japan; 3Dean and CEO,
Asi an Development Bank Insti tute; 4Deputy Dean, Asi an Development Bank Insti tute
 Contents

Resear ch
01 Backgr oun d an d
M ot iv at ion

Lit er at ur e
02 Rev iew

03 M et h odology

Em pir ical
04 r esult s

Diagr am f eat u r ed by h t t p:/ / slidem odel.com

2
 1 Research Back ground
and M oti vati on

3
 SOEs are im portant players in
global econom y

Figu r e 1: Th e GDP of UK, Fr an ce, Ger m an y com par ed t o t ot al sales of SOEs am on g t op

20 0 0 global f ir m s in 20 11

SOEs in
Ger m an y For bes
Un it ed Fr an ce $3.6 t r illion Global 20 0 0
Kin gdom $2.8 t r illion $3.6 t r illion
$2.4
t r illion

(Sou r ce: Wor ld Econ om ic For u m h t t ps:/ / w w w .w ef or um .or g/ agen da/ 2013/ 05/ st at e- ow n ed- en t er pr ises- in - t he- global-
econ om y / )

4
 SOEs are im portant players in
global econom y

Figu r e 2: SOEs’ sh ar e am on g cou n t r ies’ t op t en f ir m s (20 13)

120
96
100 88
81
80 67 68 69
59
60 48 50
37
40
23
13 15 16 17
20 11

(Sou r ce: Kow alski, P., et al. (2013), "St at e- Ow n ed En t er pr ises: Tr ade Ef f ect s an d Policy Im plicat ion s", OECD Tr ade Policy Paper s ,
5 No. 147, OECD Pu blishin g, Par is)
 SOEs are im portant players in
global econom y

Figu r e 3: SOEs am on g t h e w or ld’s lar gest com pan ies in select ed Asian cou n t r ies (20 16)

250
217
200 Companies with at
least 10%
150 128 government
ownership
100
63
52
50 34 39
22 13 19 Private- owned
6 5 2 4 12 4 12 3 3 0 2 companies
0

(Sou r ce: For bes Global 20 0 0 an d OECD an alysis)

6
 Debates on real effects of
Governm ent ownership on
ecocom ic growth
WHY GOVERNM ENT OWNERSHIP?
- An in st r um en t f or gov er n m en t s t o
r egulat e n at ur al m on opolies, public
goods pr ov ision , r egion al policies,
em ploy m en t or social issues (Gr out
an d St ev en s, 20 0 3)
- A t ool f or gov er n m en t t o r edu ce
m ar ket f ailur e (Br iggs, 1961)
7
WHY NOT GORVERNM ENT OWNERSHIP?
- M ain ly used f or t he in t er est s of t h e
r u lin g elit e (Golden g et al., 20 0 8)
- In ef f icien t ev en in t he case of m ar ket
f ailu r e (M eggin son an d Net t er , 20 0 1)
- Show in g sign s of det er ior at ion in
m uch of t h e w or ld ov er t h e last f ew
decades (Gar kh ar an d Ph u kon , 20 17)
 Th us, it ’s im por t an t t o r eassess t h e ef f icien cy
of st at e ow n er ship

8
 Research Objective
- In v est igat in g w h et her ow n er ship iden t it y
in f luen ces f ir m per f or m an ce

- Sheddin g f u r t her light on policies t ow ar ds

su ccessf ul r ef or m s of SOEs

9
 RESEARCH GAPS?

- Lack of ear lier st u dies on com pr ehen siv e

assessm en t of SOE per f or m an ce

- Lack of policy im plicat ion s f or im pr ov in g t h e

per f or m an ce an d pr oduct iv it y of SOEs.

10
 OUR CONTRIBUTIONS?

- Rev isit in g t h is issue w it h a r elat iv ely accoun t able an d

sizeable dat aset , usin g v ar ious em pir ical m et hods t o
ascer t ain t h e f in din gs

- Pr ov ide f ur t her in - dept h an aly ses of h ow labor f or ce m ay

in f luen ce f ir m ’s per f or m an ce

11
 2 Li terature Revi ew

12
 Theories

Pr oper t y r igh t Pu blic ch oice

Agen cy Th eor y
t h eor y t h eor y

13
 Em pirical research
SOEs ar e su per ior t o POEs
- Exam ples: Bar dh an an d Roen er
(1992); Kole an d M u lher in (1997);
Om r an (2004); Gupt a (200 5);
Kuzn et sov et al., (200 8); Poczt er
(20 16)…
- Fin din gs:
+ No sign if ican t dif f er en ces in
per f or m an ce bet w een SOEs an d
POEs
+ Com pet it iv en ess bein g m or e
im por t an t t h an ow n er ship iden t it y
+ How ev er , pr iv at izat ion pr ocess
cou ld h av e im por t an t spillov er
ef f ect s on SOEs
14
POEs ar e su per ior t o SOEs Neut r al v iew
- Exam ples: Boar dm an an d Vin in g - Exam ples: Par ker an d Har t ley (1991);
(1989); Vin in g an d Boar dm an (1992); Cast r o an d Uh len br uck (1997); Par ker
M eggin son et al. (1994); DeWen t er an d (20 0 4)
M alat est a (2001); Udeaja (20 06); Tr uon g
- Fin din gs:
et al. (2006); Hu an g an d Boat en g (2013);
Jay achit r a an d Ven kat r am an (20 15) + Per f or m an ce of f ir m s bein g
in depen den t of ow n er ship iden t it y
- Fin din gs:
+ St r essin g on t he im por t an ce of
+ SOEs f allin g shor t of POEs in t er m s of
cor por at e gov er n an ce an d
pr of it abilit y an d ef f icien cy
m an agem en t , com pet it iv e en v ir on m en t
+ Ow n er ship sw it ch f r om st at e t o an d capit al m ar ket disciplin e
pr iv at e ow n er ship cou ld r aise
+ When bot h POEs an d SOEs bein g
pr of it abilit y of f ir m s, en h an ce capit al
exposed t o t he sam e com pet it iv e
in v est m en t spen din g, en cou r age
pr essur es, t hey t en d t o gen er at e sim ilar
div iden d pay in g an d decr ease lev er age
y ield
 3 M ethodology

15
 Data and sam ple overview

- Dat a sour ce: Bur eau Van Dijk ORBIS dat abase
- Sam ple size: ar oun d 25,0 00 w or ld- w ide f ir m s
SOEs POEs

50% 50%

16
 Data and sam ple overview

Table 1: Variable description

No. Variable Proxy for Description

1 ROA Performance Profit before tax to the total assets
2 SOLVENCY Solvency total liabilities to total assets
Dummy, taking 1 if classified as SOEs, 0
otherwise
3 SOE Ownership Identity
*Note: SOEs being firms with at least 50.01%
state ownership
4 SIZE_ASSETS Firm size Natural logarithm of total assets
5 SIZE_SALES Firm size Natural logarithm of total sales
6 SIZE_CAPITAL Firm size Natural logarithm of capital
Numbers of year from the date of incorporation
7 AGE Firm age
to 2018
Natural logarithm of the total number of
8 LABOUR Firm size
employees
9 LABOUR/SALES Labour intensity Total employees to total sales
10 LABOUR/ASSETS Labour intensity Total employees to total assets
17 11 LEVERAGE Leverage Total short-term debts to equity
 M ethodology

Un iv ar iat e t est s OLS r egr ession Pr open sit y

scor e m at chin g

18
 M ethodology

UNIVARIATE TESTS OLS REGRESSIONS

APD = PERFORM ANCESOE - PERFORM ANCEPOE 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖 = α + δ 𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖 + β 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑖𝑖 + ε𝑖𝑖
- Tw o- w ay T- t est 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖 = α + δ 𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖 + β 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑖𝑖 + ε𝑖𝑖
- Wilcoxon r an k su m t est

PROPENSITY SCORE M ATCHING

- Com par in g t w o su b- sam ple w it h sim ilar ch ar act er ist ics
- Dif f er en t m at ch in g m et h ods:
+ Near est n eighbor s (n =1) + Gau ssian Ker n el
+ M ah alan obis + Radius (r adius = 0 .1)
+ Near est n eighbor s (n =2)
19
 4 Empi ri cal results

20
 Univariate Tests

Table 3: Comparison of performance and other financial indicators of SOEs and POEs

This table presents the mean and median comparison of performance and other firm characteristics between SOEs
and POEs. The t-test and Wilcoxon rank sum test are deployed to examine the mean and median differences
respectively, *, **, and *** denotes significance at 10%, 5% and 1% level.

Two way T-test Wilcoxon rank sum test

Variable SOE POE Difference t- SOE POE Difference z-
(1) (2) (1) - (2) Statistics (1) (2) (1) – (2) Statistics

ROA 4.260 8.010 -3.750*** -25.999 2.680 5.765 -3.085*** -33.372

SIZE_SALES 10.958 12.297 -1.339*** -62.310 10.616 11.998 -1.382*** -64.906

LEVERAGE 0.048 0.108 -0.060*** -35.325 0.001 0.041 -0.004*** -40.900

SOLVENCY 41.402 36.615 4.787*** 15.612 38.202 34.023 4.179*** 13.234

LIQUIDITY 1.929 1.543 0.386*** 7.308 1.090 0.998 0.092*** 11.538

21
 Univariate Tests

Table 3: Comparison of performance and other financial indicators of SOEs and POEs

This table presents the mean and median comparison of performance and other firm characteristics between SOEs
and POEs. The t-test and Wilcoxon rank sum test are deployed to examine the mean and median differences
respectively, *, **, and *** denotes significance at 10%, 5% and 1% level.

Two way T-test Wilcoxon rank sum test

Variable SOE POE Difference t- SOE POE Difference z-
(1) (2) (1) - (2) Statistics (1) (2) (1) – (2) Statistics

ROA 4.260 8.010 -3.750*** -25.999 2.680 5.765 -3.085*** -33.372

SIZE_SALES 10.958 12.297 -1.339*** -62.310 10.616 11.998 -1.382*** -64.906

LEVERAGE
0.048 0.108 -0.060*** -35.325 0.001 0.041 -0.004*** -40.900

SOLVENCY 41.402 36.615 4.787*** 15.612 38.202 34.023 4.179*** 13.234

LIQUIDITY 1.929 1.543 0.386*** 7.308 1.090 0.998 0.092*** 11.538

22
 OLS regressions

Table 4: Effects of ownership identity on the performance of firms

This table reports the estimation results of the effects of ownership identity on performance of firms in
terms of profitability and leverage. We use dummy variable distinguishing state-owned firms (SOEs)
and private-owned firms (POEs). Dependent variables are profitability measured by ROA and
SOLVENCY via total liabilities to total assets ratio separately. Our sample consists of 25,274 world-
wide firms. Data are retrieved from ORBIS database. Model (1) and (2) presents outcomes with ROA as
the dependent variable while Model (3) and (4) showing results for Solvency. Robust standard errors are
in parentheses. *,**, and *** denote significance at the 10%, 5% and 1% level respectively

Dependent variable ROA SOLVENCY

Model 1 Model 2 Model 3 Model 4

SOE -3.620*** 4.239***

(0.205) (0.390)
POE 3.620*** -4.239***
(0.205) (0.390)

CONTROL VARIALBES

Constant 6.942*** 3.322*** 14.78*** 19.02***

(0.934) (0.890) (1.413) (1.360)
Observations 13,273 13,273 15,178 15,178
23
 OLS regressions

Table 4: Effects of ownership identity on the performance of firms

This table reports the estimation results of the effects of ownership identity on performance of firms in
terms of profitability and leverage. We use dummy variable distinguishing state-owned firms (SOEs)
and private-owned firms (POEs). Dependent variables are profitability measured by ROA and
SOLVENCY via total liabilities to total assets ratio separately. Our sample consists of 25,274 world-
wide firms. Data are retrieved from ORBIS database. Model (1) and (2) presents outcomes with ROA as
the dependent variable while Model (3) and (4) showing results for Solvency. Robust standard errors are
in parentheses. *,**, and *** denote significance at the 10%, 5% and 1% level respectively

Dependent variable ROA SOLVENCY

Model 1 Model 2 Model 3 Model 4

SOE -3.620*** 4.239***

(0.205) (0.390)
POE 3.620*** -4.239***
(0.205) (0.390)

CONTROL VARIABLES

Constant 6.942*** 3.322*** 14.78*** 19.02***

(0.934) (0.890) (1.413) (1.360)
Observations 13,273 13,273 15,178 15,178
R-squared 0.070 0.070 0.154 0.154
24
 Propensity Score M atching
Differences in Profitability

Table 5: The impact of ownership identity on Profitability: Propensity score matching method

This table examines the effect of ownership identity on performance using a propensity score matching methodology. We split our
sample into two separate groups (SOEs and POEs) with SOEs being the firms with more than 50.01% state ownership and POEs
being firms majorly owned by private sectors. Matching starts with probit regression based on firms on these two groups, using
various characteristics (i.e. firm size in terms of total sales, leverage ratio, ROA, firm age and labour size) as control variables. For
the robustness of our results, we utilize various matching methods: Nearest neighbors (n=1), Mahalanobis, Nearest neighbors
(n=2), Gaussian Kernel, and Radius (radius = 0.1). Panel A presents the matching estimation of the loan spread between treat
firms and control firms. Panel B presents the regression estimation. The regression equation is as follows: Profitabilityi = α +
δSOEi + βControl variablei + ε𝑖𝑖 . *, **, and *** denotes significance at 10%, 5% and 1% level

PANEL A: MATCHING ESTIMATION: DIFFERENCES OF ROA BETWEEN TREATMENT AND CONTROL

FIRMS
Matching Method Treatment firms (1) Control firms (2) Difference (1) – (2) t-Statistics
Near neighbor (n=1) 3.945 13.420 -9.475*** -5.79
Mahalanobis 3.945 10.369 -6.423*** -4.48
Near neighbor (n=2) 3.945 12.068 -8.123*** -5.58
Kernel Gaussian 3.945 10.722 -6.777*** -10.30
Radius (0.1) 3.945 11.224 -7.279*** -7.96
25
 Propensity Score M atching
Differences in Profitability

PANEL B: REGRESSION ESTIMATION: BASED ON MATCHING SAMPLES

Dependent variable: ROA
Near neighbor (n=1) Mahalanobis Near neighbour (n=2) Kernel Gaussian Radius (0.1)
(1) (2) (3) (4) (5)

SOE -5.313*** -4.692*** -4.736*** -5.249*** -5.293***

(0.202) (0.188) (0.902) (0.852) (0.868)
SIZE_SALES -0.024 -1.003*** 0.072 0.062 0.049
(0.094) (0.104) (0.372) (0.389) (0.392)
AGE -0.026*** -0.019*** -0.024** -0.017* -0.018*
(0.003) (0.003) (0.010) (0.010) (0.010)
LEVERAGE -12.66*** -13.75*** -12.11*** -15.09*** -15.25***
(0.949) (0.959) (1.974) (1.801) (1.853)
LABOUR -0.002 0.642*** 0.082 0.022 0.028
(0.106) (0.106) (0.255) (0.246) (0.250)
LIQUIDITY 0.042 0.126*** 0.071 0.087** 0.084*
(0.032) (0.023) (0.054) (0.043) (0.044)
LABOUR_SALES 0.032 -0.061 0.041 0.037 0.035
(0.057) (0.051) (0.068) (0.066) (0.066)
COST_EMPLOYEE -0.062*** -0.113*** -0.060*** -0.046*** -0.046***
(0.005) (0.007) (0.018) (0.017) (0.017)

Constant 12.58*** 19.93*** 10.36** 10.69** 10.89**

(0.721) (0.888) (4.410) (4.524) (4.577)
Observations 12,836 12,836 9,426 13,273 13,273
26 R-squared 0.072 0.085 0.063 0.068 0.069
 Propensity Score M atching
Differences in Solvency

Table 6: The impact of ownership identity on Solvency: Propensity score matching method
This table examines the effect of ownership identity on performance using a propensity score matching methodology. We split our
sample into two separate groups (SOEs and POEs) with SOEs being the firms with more than 50.01% state ownership and POEs
being firms majorly owned by private sectors. Matching starts with probit regression based on firms on these two groups, using
various characteristics (i.e. firm size in terms of total sales, leverage ratio, ROA, firm age and labour size) as control variables. For
the robustness of our results, we utilize various matching methods: Nearest neighbors (n=1), Mahalanobis, Nearest neighbors (n=2),
Gaussian Kernel, and Radius (radius = 0.1). Panel A presents the matching estimation of the loan spread between treat firms and
control firms. Panel B presents the regression estimation. The regression equation is as follows: Solvencyi = α + δSOEi + βControl
variablei + . *, **, and *** denotes significance at 10%, 5% and 1% level

PANEL A: MATCHING ESTIMATION: DIFFERENCES OF SOLVENCY BETWEEN TREATMENT AND CONTROL

FIRMS
Matching Method Treatment firms (1) Control firms (2) Difference (1) – (2) t-Statistics
Near neighbor (n=1) 40.963 33.257 7.706*** 5.28
Mahalanobis 40.963 32.629 8.334*** 3.30
Near neighbor (n=2) 40.963 33.160 7.803*** 5.68
Kernel Gaussian 40.963 34.053 6.910*** 7.89
Radius (0.1) 40.963 33.885 7.078*** 7.48
27
 Propensity Score M atching
Differences in Solvency
PANEL B: REGRESSION ESTIMATION: BASED ON MATCHING SAMPLES
Dependent variable: SOLVENCY
Near neighbor (n=1) Mahalanobis Near neighbor (n=2) Kernel Gaussian Radius (0.1)
(1) (2) (3) (4) (5)

SOE 6.099*** 7.334*** 5.988*** 6.471*** 6.474***

(0.390) (0.363) (0.665) (0.465) (0.466)
LIQUIDITY 0.302*** 1.261*** 0.420** 0.473*** 0.473***
(0.048) (0.134) (0.180) (0.117) (0.115)
AGE 0.050*** 0.031*** 0.045*** 0.048*** 0.048***
(0.006) (0.005) (0.010) (0.007) (0.007)
COST_EMPLOYEE 0.030*** 0.046*** 0.032* 0.053*** 0.053***
(0.008) (0.010) (0.018) (0.013) (0.013)
ROA 0.468*** 0.466*** 0.457*** 0.496*** 0.493***
(0.021) (0.022) (0.053) (0.032) (0.032)
SIZE_ASSET -0.762*** -0.448*** -0.775* -0.433** -0.439**
(0.173) (0.144) (0.430) (0.214) (0.213)
SIZE_CAPITAL 1.750*** 1.822*** 1.709*** 1.647*** 1.647***
(0.100) (0.096) (0.128) (0.108) (0.109)

Constant 25.24*** 18.35*** 25.77*** 21.06*** 21.13***

(1.747) (1.367) (5.196) (2.345) (2.325)
Observations 13,730 13,730 11,910 15,178 15,178
28 R-squared 0.101 0.155 0.106 0.118 0.118
 Robustness check

Table 6: Robustness tests.

This table presents the results of robustness checks. Models (1) to (2) examine the effect of ownership
identity on profitability of firms. Models (3) and (4) compare the differences on performance in terms
of solvency between SOEs and POEs. The main explanatory and other control variables are similar to
those in Eq. (1.1), (1.2), (2.1) and (2.2). Robust standard errors are in parentheses. *, **, and ***
denote significance levels of 10%, 5%, and 1%, respectively.

Dependent Variable ROE LTD/Assets

Model 1 Model 2 Model 3 Model 4

SOE -11.700*** 4.247***

(1.562) (0.392)
POE 11.70*** -4.247***
(1.562) (0.392)

CONTROL VARIALBES

Constant 7.559 -4.140 14.633*** 18.880***

(7.500) (6.952) (1.421) (1.368)
Observations 13,273 13,273 15,020 15,020
29
 Additional analyses

How dif f er en t aspect s of labour could

in f luen ce t he per f or m an ce of f ir m s?

30
 Labour characteristics and
firm perform ance

Table 7: Ownership identity, Labour size, Labour intensity, Labour cost and Firm performance

This table presents the results of additional analyses. Panel A, B, C reports findings from univariate tests, propensity
score matching test and OLS regression respectively. In Panel C, Models (1) to (3) examine the effect of ownership
identity on profitability of firms with regard to the differences in labour size, labour intensity and labour cost
separately. Robust standard errors are in parentheses. *, **, and *** denote significance levels of 10%, 5%, and 1%,
respectively

PANEL A: UNIVARIATE TESTS

Two way T-test Wilcoxon rank sum test

Variable
SOE POE Difference t- SOE POE Difference
z-Statistics
(1) (2) (1) - (2) Statistics (1) (2) (1) – (2)
LABOUR 5.434 5.905 -0.471*** -20.129 5.361 5.991 -0.630*** -24.204
LABOUR/SALES 0.065 0.005 0.060*** 2.850 0.004 0.002 0.002*** 27.074

LABOUR/ASSET 0.012 0.017 -0.005* -0.866 0.0026 0.0035 -0.001*** -5.096

COST_EMPLOYEE 25.766 14.661 11.105*** 39.375 19.244 10.61 8.634*** 36.762

31
 Labour characteristics and
firm perform ance

Table 7: Ownership identity, Labour size, Labour intensity, Labour cost and Firm performance

This table presents the results of additional analyses. Panel A, B, C reports findings from univariate tests, propensity
score matching test and OLS regression respectively. In Panel C, Models (1) to (3) examine the effect of ownership
identity on profitability of firms with regard to the differences in labour size, labour intensity and labour cost
separately. Robust standard errors are in parentheses. *, **, and *** denote significance levels of 10%, 5%, and 1%,
respectively

PANEL B: PROPENSITY SCORE MATCHING – LABOUR/SALES

TREATMENT CONTROL Difference
Method t-Statistics
(1) (2) (1) – (2)
Near neighbor (n=1) 0.069 0.022 0.046* 1.94

Mahalanobis 0.069 0.012 0.057** 2.02

Near neighbor (n=2) 0.069 0.018 0.051** 2.18

Kernel Gaussian 0.069 0.022 0.467** 2.06

Radius (0.1) 0.069 0.022 0.467** 2.08

32
 Labour characteristics and
firm perform ance

Table 7: Ownership identity, Labour size, Labour intensity, Labour cost and Firm performance

This table presents the results of additional analyses. Panel A, B, C reports findings from univariate tests, propensity
score matching test and OLS regression respectively. In Panel C, Models (1) to (3) examine the effect of ownership
identity on profitability of firms with regard to the differences in labour size, labour intensity and labour cost
separately. Robust standard errors are in parentheses. *, **, and *** denote significance levels of 10%, 5%, and 1%,
respectively

PANEL C: OLS REGRESSION

Dependent variable: ROA

Labour size Labour Intensity Labout cost

Model 1 Model 2 Model 3

SOE -5.187*** -4.098*** -2.851***

(0.572) (0.176) (0.273)
CONTROL VARIALBES

SOE*LABOUR 0.181**
(0.087)
SOE*LABOUR/SALES -5.405
(12.48)
SOE*COSTEMPLOYEE -0.043***
(0.010)

Constant -1.272* -2.201*** 0.644

(0.740) (0.629) (0.965)
Observations 18,580 18,580 13,273

33
 Labour characteristics and
firm perform ance

Table 7: Ownership identity, Labour size, Labour intensity, Labour cost and Firm performance

This table presents the results of additional analyses. Panel A, B, C reports findings from univariate tests, propensity
score matching test and OLS regression respectively. In Panel C, Models (1) to (3) examine the effect of ownership
identity on profitability of firms with regard to the differences in labour size, labour intensity and labour cost
separately. Robust standard errors are in parentheses. *, **, and *** denote significance levels of 10%, 5%, and 1%,
respectively

PANEL C: OLS REGRESSION

Dependent variable: ROA

Labour size Labour Intensity Labout cost

Model 1 Model 2 Model 3

SOE -5.187*** -4.098*** -2.851***

(0.572) (0.176) (0.273)
CONTROL VARIALBES

SOE*LABOUR 0.181**
(0.087)
SOE*LABOUR/SALES -5.405
(12.48)
SOE*COSTEMPLOYEE -0.043***
(0.010)

Constant -1.272* -2.201*** 0.644

(0.740) (0.629) (0.965)
Observations 18,580 18,580 13,273

34
 Labour characteristics and
firm perform ance

Table 7: Ownership identity, Labour size, Labour intensity, Labour cost and Firm performance

This table presents the results of additional analyses. Panel A, B, C reports findings from univariate tests, propensity
score matching test and OLS regression respectively. In Panel C, Models (1) to (3) examine the effect of ownership
identity on profitability of firms with regard to the differences in labour size, labour intensity and labour cost
separately. Robust standard errors are in parentheses. *, **, and *** denote significance levels of 10%, 5%, and 1%,
respectively

PANEL C: OLS REGRESSION

Dependent variable: ROA

Labour size Labour Intensity Labout cost

Model 1 Model 2 Model 3

SOE -5.187*** -4.098*** -2.851***

(0.572) (0.176) (0.273)
CONTROL VARIALBES

SOE*LABOUR 0.181**
(0.087)
SOE*LABOUR/SALES -5.405
(12.48)
SOE*COSTEMPLOYEE -0.043***
(0.010)

Constant -1.272* -2.201*** 0.644

(0.740) (0.629) (0.965)
Observations 18,580 18,580 13,273
R-squared 0.127 0.127 0.120

35
 Di scussi on and Conclusi on
1. SOEs appear t o be less pr of it able t han POEs.
2. For assessin g t he per f or m an ce of SOEs it s n ot en ough t o look on ly at t heir pr of it abilit y
because m an y SOEs ar e est ablished f or pr ov idin g social ser v ices an d n ot w it h
object iv e of pr of it m axim izat ion .
3. It s im por t an t t o assess t he per f or m an ce of SOEs, if n ot t his w ill r educe t he
pr oduct iv it y of public capit al an d w ill slow t he econ om ic gr ow t h.
4. A com pr ehen siv e f r am ew or k f or assessm en t of per f or m an ce of SOEs is t he on e t hat
looks at v ar ious aspect s in cludin g t he pr of it abilit y , lev er age, per em ploy ee v ar iables
an d et c.
5. Em pir ical r esult s show t hat SOEs t en d t o be m or e depen den t on debt t han POEs.
6. SOEs t en d t o be m or e labour in t en siv e an d hav e higher labour cost t han POEs.

 Pri vati zati on could be consi dered as a dri ve for fi rm’s effi ci ency,
36
thus, economi c development.
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