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State ownership and financial reporting quality: Evidence from natural advantage industries

Author

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  • Boubakri, Narjess
  • Durnev, Art
  • Oliveira dos Santos, Igor

Abstract

Using a hand-collected sample of state-owned enterprises and newly privatized firms around the globe, we examine financial reporting quality in natural advantage (substantial oil reserves or mineral deposits) industries. We find that ultimate state ownership tends to deteriorate financial reporting quality. Such a finding tends to occur particularly in countries with low shareholder minority protection, low financial development, high resource extraction intensity, low freedom of the press, collectivist societies, poor government anti-diversion policies, and in resource-dependent countries. Finally, we document that ultimate state ownership in the context of better financial reporting quality is associated with exacerbated capital expenditures, which indicate resource overextraction. Such a finding applies particularly to resource-dependent countries and civil-law countries.

Suggested Citation

  • Boubakri, Narjess & Durnev, Art & Oliveira dos Santos, Igor, 2025. "State ownership and financial reporting quality: Evidence from natural advantage industries," Journal of Corporate Finance, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:corfin:v:91:y:2025:i:c:s0929119924001494
    DOI: 10.1016/j.jcorpfin.2024.102687
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    More about this item

    Keywords

    Privatization; Natural advantage; Rent-seeking; Resource extraction;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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