Governance and State-Owned Enterprises: How Costly is Corruption?

Abstract

State-owned enterprises (SOEs) are present in key sectors of the economies around the world. While they can provide an important public service, there is widespread concern that their activities are negatively affected by corruption. However, there is limited cross-country analysis on the costs of corruption for SOEs. We present new evidence on how corruption affects the performance of SOEs using firm level data across a large number of countries. One striking result is that SOEs perform as well as private firms in core sectors when corruption is low. Taking advantage of a novel database reforms, we also show that SOE governance reforms can generate significant performance gains.

Keywords: Economic policy, Economic growth, Financial indicators, Economic indicators, Public sector, State-owned enterprises, firm performance, corruption, governance reforms, WP, SOEs, IMF program, conditionality, governance reform, control of corruption

JEL Classification: D20, D73, H00, E01, C43, E2, O4, Z13