State Ownership and Corporate Investment

59 Pages Posted: 22 Feb 2016 Last revised: 24 Aug 2018

See all articles by Patrick Jaslowitzer

Patrick Jaslowitzer

University of Marburg - School of Business & Economics

William L. Megginson

University of Oklahoma

Marc Steffen Rapp

University of Marburg - School of Business & Economics; University of Marburg - Marburg Centre for Institutional Economics (MACIE)

Date Written: August 22, 2018

Abstract

We investigate the relation between state ownership and corporate investment. In a matched panel of 624 European firms, state ownership curtails firms’ responsiveness to investment opportunities. With increasing government ownership, investment becomes more sensitive to internal funds when capital constraints or financing needs are high, or government has limited control over domestic banks. State ownership negatively affects investment levels but mitigates reductions during the financial crisis. We address identification concerns both econometrically and through references to existing privatization research. Overall, our evidence suggests that state ownership is associated with inefficient but stability-seeking investment policies and increased levels of capital constraints.

Keywords: Government policy and regulation, state ownership, corporate investment

JEL Classification: G32, G31, G32, G38, D92, E22

Suggested Citation

Jaslowitzer, Patrick and Megginson, William L. and Rapp, Marc Steffen, State Ownership and Corporate Investment (August 22, 2018). Available at SSRN: https://ssrn.com/abstract=2735698 or http://dx.doi.org/10.2139/ssrn.2735698

Patrick Jaslowitzer

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

William L. Megginson

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

Marc Steffen Rapp (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

University of Marburg - Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

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