Does Ownership Identity Matter? A Meta‐analysis of Research on Firm Financial Performance in Relation to Government versus Private Ownership

Abstract

We examine whether reported ownership-performance relations systematically differ for government versus private ownership by integrating the diverse empirical results for listed corporations in emerging markets. Our meta-analysis confirms popular perceptions that, compared to private ownership, government ownership is associated with inferior performance. We find that, on average, the underlying ownership-performance relation is negative for government ownership and positive for private ownership, and the difference between these relations is significant. We also find that the positive private ownership-performance relation is stronger for institutional/foreign ownership compared to family/management ownership. Further analysis shows that negative (positive) government (private) ownership and performance relations have weakened (strengthened) over time. Our assessment of the sources of heterogeneity shows that reported relations are biased by estimation methods that fail to adequately control for endogeneity. Our results suggest that the nature of ownershipperformance relations in emerging markets remains very dynamic and warrants ongoing research interest. methods, including the use of fixed effects or instrumental variable approaches to account for endogeneity problems. The validity of analyzing the performance relations for listed companies is greater than that of earlier comparative studies if listed companies are expected to pursue comparable financial objectives irrespective of differences in ownership identities.Despite the advantages of using listed companies to examine relations between ownership identity and firm performance, the empirical studies in this area report highly inconsistent results. Reported relations between the percentage of government or private ownership and firm performance are positive, negative, or mixed. These diverse results pose a barrier to consolidating knowledge and further developing research in this area. We address this problem by using meta-analytic techniques to integrate the diverse empirical findings and assess the sources of heterogeneity. In doing so, we make two main contributions to the literature in this field. First, we help move towards resolution of the debate concerning the relative merits of government versus private control of listed companies. Meta-analysis allows us to obtain unbiased generalizations from the pooled results of multiple studies (Glass et al., 1981), with higher statistical power (Cohn and Becker, 2003), and higher external validity (Konstantopoulos, 2006) than can be obtained from the individual studies. However, we cannot overcome all sources of bias in the original studies. Similar to Wang and Shailer (2015), we use meta-regression techniques proposed by Stanley and Jarrell (1989) to account for potential biases arising from relative deficiencies in the research design of primary studies. Using these techniques, we tease out some of the confounding effects of study characteristics on reported relations when estimating the average ownership-...

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