Government Ownership, Financial Constraint, Corruption, and Corporate Performance: International Evidence

Abstract

Using a sample of 8,232 firms from 81 countries, we investigate the effect of government ownership on financial constraint and the effect of financial constraint on corporate performance. In addition, we address the moderating role of country-level corruption on those two relationships. Results show that government-owned firms face fewer financial constraints and that firms with fewer financial constraints perform better. Furthermore, we find that the association between government ownership and financial constraint and the association between financial constraint and corporate performance are less pronounced for firms operating in countries with a lower level of corruption.

Keywords: Government Ownership; Financial Constraint; Corruption; Performance

JEL Classification: G14; G30