Can minority state ownership influence firm value? Universal and contingency views of its governance effects

Drawing on the literature of corporate governance and privatization, this study explores the elusive roles of a specific owner identity, namely, state ownership in its minority. With a sample of 68 Taiwanese companies with 5 to 49% state ownership during 1999-2003, the study examines the value-shaping effects of minority state ownership (MSO) and, furthermore, seeks to establish a contingency perspective suggesting that the internal and external contexts may moderate the influence of MSO on firm value. Using first-order autoregressive models to mitigate the problems of endogeneity, the study shows that the governance effect of MSO associates not only in a curvilinear relationship with firm value but also strengthened by corporate ownership ties and market competition. The non-monotonic performance effect and the context-dependent nature of MSO yield significant implications for government investments in the private sector.