Government Ownership and the Performance of Government-Linked Companies: The Case of Singapore

• Main Authors: ANG, James, DING, David K.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2006
• Subjects: Corporate governance; Government-linked corporations; Government ownership; Singapore; Asian Studies; Business; Corporate Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/1154; https://ink.library.smu.edu.sg/context/lkcsb_research/article/2153/viewcontent/Govt_ownership_GLC_2006_av.pdf
• Institution: Singapore Management University

In an emerging economy, the alternative to government control is often no governance. We investigate the governance structure of government-linked companies (GLCs) in Singapore under the ownership/control structure of Temasek Holdings, the government holding entity, which typically owns substantial cash flow rights but disproportional control rights and exercises no operational control. We compare the financial and market performance of GLCs with non-GLCs, where each has a different set of governance structure, the key difference being government ownership. We show that Singaporean GLCs have higher valuations and better corporate governance than a control group of non-GLCs. The results hold even when we control for firm specific characteristics such as profitability, leverage, firm size, and foreign ownership.