Responding to Financial Crisis: The Rise of State Ownership and Implications for Firm Performance

Carney, Richard W. and Liu, Wai-Man (Raymond) and Ngo, Phong T. H. (2012): Responding to Financial Crisis: The Rise of State Ownership and Implications for Firm Performance.

Abstract

We examine changes to corporate ownership in nine East Asian countries following the 1997 Asian Financial Crisis. Countries with lower incomes and in which policy making involves greater transactions costs (i.e., veto points) have more firms with state ownership. Partial state ownership appears to be effective insurance against crisis. Firms with minority state ownership exhibit 5% (annualized) lower idiosyncratic volatility in the quarter of the Lehman Brothers collapse than firms with either no or dominant state ownership. Minority state-owned firms also enjoy a higher abnormal return of 3.7% and 6.1% in the two quarters following the collapse of Lehman Brothers.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial crisis, government ownership, veto players, insurance, corporate performance
• Subjects: H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; G - Financial Economics > G1 - General Financial Markets > G10 - General

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