Factors Affecting Performance Of State-owned Enterprises In Large Developing Countries

State-owned enterprises(abbreviated to SOEs) master the lifeblood of nationaleconomy, and the development of SOEs is the dominant force in economicdevelopment. How to intensify the reform of SOEs, improve the SOEs performance,enhance the controling power of the state-owned economy becomes a majordevelopment issue facing the government. Because of the ownership characteristicsand limitations of the social functions, SOEs have defects in the structure, operationand management, which lead to the overall lower level of performance compared withprivate sector. Scholars have analyzed the reasons for the poor performance of SOEs,and come to three thoughts: the corporate governance theory, property rights theoryand competition theory. Taking these theoretical ideas together, this paper suggeststhat there are many factors affecting the performance of SOEs, including not only themicro-level factors such as the size of the company, corporate governance, but alsothe macro-level factors, such as industry environment, the domestic situation ofeconomic development, government policy support and so on.Many large developing countries are facing the same situation as China thatattempt reform of SOEs. Taking India for example, this paper provides references andexperiences for the direction choice of the further reform of Chinese SOEs throughstudying the reform process of Indian SOEs. India and China both belong to the"BRICS", and there are many comparable aspects such as the location, the size of thepopulation, the fundamentals of the domestic economic development, the surroundinginternational environment. Therefore, we analyze the trends of Indian SOEs in thelayout structure, mode of operation and the overall level of performance over the last decade, and find out that industrial structure of Indian SOEs becomes optimized, themode of operation tends to be market-oriented, the level of performance has anoverall increase. Then we use the panel model based on that of Souza et al (2005) totake an empirical test of36listed SOEs in India, finding that both the micro level andmacro-level factors have an impact on the SOEs performance. Improving the SOEsperformance needs both the good corporate governance structure and a stableenvironment for economic growth.This paper is divided into five sections as follows:Section one reviewed the existing literature from the definition and classificationof SOEs, recalling the reasons for the privatization of SOEs reform in largedeveloping countries, discussing Indian SOEs reform measures and impact since the1980s.Then we summarize the comparative perspective of scholars on the level ofSOEs performance and private enterprises, also the influencing factors and theanalysis methods of corporate performance. There are still some imperfections incurrent findings. This section also describes the research background, researchmethods and so on.Section two is a theoretical discussion of improving the SOEs performance. Wesummed up the aspects that affect the SOEs performance reform through thecomments of property rights theory, corporate governance theory and competitiontheory. It provides a theoretical basis for section four.Section three outlines the recent trend of the development of Indian SOEs in theindustrial layout structure, mode of operation and the overall level of performancethrough the collation and analysis of data. We mastered the development and strategicdirection of SOEs of large developing countries in recent years. Industrial layoutstructure of India’s SOEs tends to reasonable; mode of operation is developing to bemore international and market-oriented. These changes promote the level ofperformance Indian SOEs in a certain extent.Sector four is based on the past three sections. It is an empirical analysis of thefactors affecting the SOEs performance. In this section, we take Indian listed SOEs assamples, build a panel data model to qualitatively analyze the factors of the national level, industry level and the corporate governance level affecting SOEs performancein India.Section five is the concluding part of this paper. Combining with theories andactuality of Indian SOEs, we summarize the empirical results, and on this basis, makepolicy recommendations relying on the experiences and lessons of the Indianstate-owned enterprise reform for deepening the reform of Chinese SOEs: Thegovernment should gradually reduce the scale of investment in SOEs, improve theefficiency of investment, and encourage SOEs listing and financing; make reasonableadjustments on the structure layout of the SOEs, SOEs should be concentrated onstrategic and technology-based industries; Continuously promote market-orientedreform of SOEs, rectify loss-making state-owned enterprise, reform board structure,encourage international operations, etc. China can learn from Indian SOEs aboutmeasures and programs in the structural adjustment of the industrial layout,market-oriented reforms and corporate governance reform. It can provide a referencefor the further reform of Chinese SOEs.