نقش مالکیت دولتی بر کیفیت درآمد: شواهدی در مورد شرکت های دولتی و خصوصی اروپایی The role of state ownership on earnings quality: evidence across public and private European firms

1. Introduction Using a sample of large firms in 27 developed countries, La Porta et al. (1999) conclude that few firms are owned by a widely dispersed group of shareholders, but rather controlled by families or the state (see also Claessens et al., 2000; Faccio and Lang, 2002). In this paper, we study the financial reporting practices of state-owned firms. State-owned firms contribute significantly to the GDP, employment and market capitalization of several OECD countries and still have a dominant feature in the economy of many non-OECD countries (OECD, 2005). Indeed, governments and stateowned firms represent approximately one fifth of global stock-market capitalization (Economist, 2010) and many state-owned firms have gained major influence in the economy because of their market power in strategic industries, such as energy, transport and telecommunication. In Europe, state-owned firms account for a large share of output and employment in many European Union (EU) member states and play an important role in the life of European citizens and businesses (EU, 2016). Indeed, although they are more dominant in the new EU member states, such as Poland, Croatia, Romania and Slovenia, they still are important players in some EU 15 member states, such as France, Italy and Sweden (EU, 2016). The global financial crisis of 2008-2009 has also contributed to this growing form of government ownership, prompting many industrialized states to increase their stake in private firms worldwide (Musacchio and Flores-Macias, 2009). There is a general belief that state-owned firms are less efficient than non-state-owned firms (see Djankov and Murrell, 2002;Estrin et al., 2009; Netter and Megginson, 2001). Also, empirical research has shown that firms experience improvements in profitability, efficiency, and resource allocation following privatization (Megginson et al., 1994). Downloaded by University of British Columbia Library At 09:56 02 April 2018 (PT) 3 There are several reasons that may explain why state-owned firms are inefficient: social and political goals may not be consistent with profit maximization; managers are chosen based on their political connections instead of their skills and performance; greater information asymmetries and transaction costs; and greater agency costs and less monitoring. However, state ownership can also bring benefits to the firm, such as provide ownership stability and ensure financing during crisis periods (Hope, 2013). In fact, the state is not an ordinary player and investor. The triple role of the government as a regulator, enforcer of laws, and owner of assets, creates the possibility of a favourable treatment to state-owned firms. They may benefit by granting advantages and privileges such as direct subsidies, concessionary financing and state-backed guarantees, and preferential regulatory treatment. Therefore, there is a trade-off for state ownership and prior studies discuss the cost and benefits of state ownership, and in particular, of privatization (e.g. Schmidt, 1996).