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The Financial Sustainability of State-Owned Enterprises in an Emerging Economy

Author

Listed:
  • Chee Loong Lee

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

  • Riayati Ahmad

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

  • Wing Shing Lee

    (Department of International Business and Administration, I-Shou University, Dashu District, Kaohsiung City 840001, Taiwan)

  • Norlin Khalid

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

  • Zulkefly Abdul Karim

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

Abstract

When the government creates state-owned enterprises (SOEs), one of the primary purposes is to reduce its financial burden in the long run, also called financial sustainability. Nonetheless, previous research has pointed out that SOEs struggle to achieve financial sustainability due to government intervention. In this study, we examine the relationship between the financial sustainability of SOEs and government intervention in Malaysia. We take a novel approach, using share ownership to measure government intervention. Our results show that the threshold effect of government ownership on financial sustainability in Malaysia is around 27%. The findings prove that the SOEs of an emerging country could reach financial sustainability only if the government ownership is below the threshold. Finally, this study discusses the policy implications of our findings for SOEs. The government of Malaysia should propose a road map to gradually reduce its ownership of SOEs below the threshold.

Suggested Citation

  • Chee Loong Lee & Riayati Ahmad & Wing Shing Lee & Norlin Khalid & Zulkefly Abdul Karim, 2022. "The Financial Sustainability of State-Owned Enterprises in an Emerging Economy," Economies, MDPI, vol. 10(10), pages 1-13, September.
    • Handle: RePEc:gam:jecomi:v:10:y:2022:i:10:p:233-:d:920893
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    References listed on IDEAS

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    3. Pornchai Wisuttisak & Nasarudin Bin Abdul Rahman, 2021. "Regulatory Frameworks for Reforms of State-Owned Enterprises in Thailand and Malaysia," ADB Institute Series on Development Economics, in: Farhad Taghizadeh-Hesary & Naoyuki Yoshino & Chul Ju Kim & Kunmin Kim (ed.), Reforming State-Owned Enterprises in Asia, chapter 0, pages 41-64, Springer.
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    6. Kole, Stacey R & Mulherin, J Harold, 1997. "The Government as a Shareholder: A Case from the United States," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 1-22, April.
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    Cited by:

    1. Adeyemi Adebayo & Barry Ackers, 2024. "Managing Trade‐Offs Between Environmental, Social, Governance and Financial Sustainability in State‐Owned Enterprises: Insights from an Emerging Market," Australian Accounting Review, CPA Australia, vol. 34(1), pages 55-73, March.

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