Finance and Financial Management Commons^™

Residual State Ownership, Policy Stability And Financial Performance Following Strategic Decisions By Privatizing Telecoms, Paul M. Vaaler, Burkhard N. Schrage

Research Collection Lee Kong Chian School Of Business

We question previous research assuming that privatizing firm performance generally benefits from decreasing state ownership and the passage of time, both of which purportedly align principal-agent incentives promoting organizational decision-making that increases shareholder value. When state ownership shifts from majority and controlling to minority and non-controlling, the performance impact may be positive in the short run, particularly where there is instability in the local investment policy environment. Consistent with this proposition, we develop and test hypotheses derived from a minority and non-controlling or residual state ownership framework, grounded in credible privatization and institutional theory. We propose that: (1) residual state …