TITLE:
Corporate Governance of SOEs and Performance in Transition Countries. Evidence from Lithuania
AUTHORS:
Claudia Curi, Justas Gedvilas, Ana Lozano-Vivas
KEYWORDS:
SOE, Corporate Governance, Transition Economy, DEA, Bootstrap
JOURNAL NAME:
Modern Economy,
Vol.7 No.12,
November
1,
2016
ABSTRACT: This paper investigates whether and to what extent
corporate governance mechanisms affect the efficiency of State Owned
Enterprises (SOEs) operating in transition economies. Furthermore, it examines
the relationship between corporate governance practice and its impact on both
wholly state run SOEs and majority state run SOEs. We employed a unique dataset
of corporate governance ratings (related to quality of transparency, quality of
board, and quality of strategic planning, implementation and control) of
commercial Lithuanian SOEs relating to the period following the introduction of
the corporate governance reforms in the years 2012-2013. In order to
investigate our research hypotheses, we set up a two-stage empirical research
strategy that combined a non-parametric efficiency estimator (i.e., Data Envelopment Analysis) with a
bootstrapped truncated regression. We built two aggregate indexes of corporate
governance ratings to represent one dimension of corporate governance quality.
We then ran a battery of regressions using both the aggregated and the single
corporate governance indexes as independent variables. First, the paper finds
that the wholly state ownership model of SOEs is positively correlated to
efficiency (i.e., wholly SOEs are
more efficient than majority SOEs). Moreover, overall corporate governance
practices are efficiency-enhancing; more specifically, board quality and
strategic planning seem to be effective internal governance mechanisms in
promoting overall organizational efficiency. Interestingly, we uncovered that
there exists a relationship between concentration of ownership and corporate
governance practices, but this mitigated efficiency enhancement in wholly state
run SOEs compared to majority state run SOEs. This effect was driven by the
lower quality of the board. Overall, our findings illustrate that corporate
governance reforms have enhanced efficiency, but wholly SOEs require a better
implementation in order to achieve full efficiency gains.