The Market Value of Government Ownership

47 Pages Posted: 15 May 2017 Last revised: 12 Dec 2017

See all articles by Narjess Boubakri

Narjess Boubakri

American University of Sharjah - School of Business and Management; HEC Montreal - Department of Finance

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

William L. Megginson

University of Oklahoma

Date Written: December 8, 2017

Abstract

Motivated by the recent rise of state capitalism, this paper investigates the effects of government ownership on market valuations across a sample of publicly listed corporations from East Asia. We find strong, robust evidence that government-owned firms exhibit higher market valuation than non-government-owned firms, but the relation is not linear. The benefits of government ownership in terms of value premium extend to closely held firms where the government is a second blockholder. These effects stem from the financing decisions of government-owned firms and from the discount rate of cash flows, and hold prior to and during the recent global financial crisis. Additional analyses suggest that the effect of government ownership on valuation is influenced by financial market development and the quality of government and institutions in place. Collectively, our results imply that government involvement in private firms can be valuable.

Keywords: Government Control; Financial Crises; Corporate Valuation

JEL Classification: G32; G34

Suggested Citation

Boubakri, Narjess and El Ghoul, Sadok and Guedhami, Omrane and Megginson, William L., The Market Value of Government Ownership (December 8, 2017). Available at SSRN: https://ssrn.com/abstract=2967915 or http://dx.doi.org/10.2139/ssrn.2967915

Narjess Boubakri

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

HOME PAGE: http://www.aus.edu

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

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-

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