State Ownership In Terms Of Transition: Curse Or Blessing. The Cases Of Kazakhstan And China
This dissertation argues that the institutional framework within transition economies, including the lack of a liquid capital market and a competitive product market, in addition to the focus on public benefits and socio-economic development, favors state-owned companies in terms of a non-market based system notwithstanding the popular concept of transaction costs and corporate efficiency. Despite the apparent costs of state ownership, including political considerations, soft budget constraints and weak profit motivations, there is a rational choice for state ownership in cases when private firms are not able to deliver the same quality of goods at a lower cost. Within the standard framing, successful application of the best practices of corporate governance requires an efficient financial market, where stocks are liquid and corporate conduct is transparent. In this situation, the market for corporate control is a check on the firm's behavior. However, in transition economies, where just a small portion of the entire market's shares is publicly traded, the stock price bears little relationship to a company's underlying value, performance, or governance. Weak contract enforcement, poor protection of property rights, and underdeveloped capital markets have brought about a different set of governance mechanisms and policy agendas including the creation of competitive production capabilities, industrialization, economic diversification and social security. Thus, any discussion of corporate governance in these countries must consider the implications of state ownership structures. Prior studies largely fail to properly identify and distinguish different forms of state ownership. While all forms of state corporate vehicles are ultimately owned by the state, they differ in many aspects. In contrast to the traditional governance model of state-owned entities generally characterized by overemployment, strong government control, weak incentives and political considerations, state companies today have different corporate structures and governance models. In particular, many stateowned enterprises have been corporatized and listed on domestic and international stock exchanges. In other words, they have been transformed into share-based, profit-oriented corporations (typically in the form of a limited liability company or a joint stock company), where the government has formally withdrawn from management and keeps the position of a shareholder. As opposed to the traditional governance structure, the corporate structure of state-owned entities today looks similar to their private counterparts including such corporate bodies as a general meeting of shareholders, a board of directors, and an audit committee. Many state companies have minority shareholders and independent directors in their corporate structures. They have become subject to the same governance and accounting standards and regulations as their private counterparts. These changes in state governance structures have produced a new composition of incentives and objectives as opposed to traditional state entities. Consequently, gathering all the types of state enterprises into one group (that has been typically done in prior studies) creates a misleading notion about the real effect of state shareholding. This paper offers another insight into questions of corporate efficiency and alternative governance models of state ownership in transitional economies based on the examples of China and Kazakhstan. My study attempts to determine whether the models of state ownership, existing in transition economies, diminish institutional shortcomings and have important implications for capital costs and the investment policies of the market actors.
corporate governance; state ownership; transition economy
Thomas,Chantal; Ndulo,Muna B.
Doctor of Science of Law
dissertation or thesis