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Working Paper

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In a special report in 2010, The Economist called the resurgence of state-owned mega-enterprises, especially those in emerging economies, “Leviathan Inc.”, and warned about the dangers of the state capitalism model. Traditionally, state-owned firms have been criticized for poor governance and questionable efficiency. In fact, they may be better positioned to deal with market failures and externalities. Our findings based on publicly-listed firms in 45 countries suggest that government-controlled companies engage more in environmental issues, and this engagement does not come at a cost to shareholder value. The effect is more pronounced among firms in emerging market economies and in countries with higher energy risks. The effect is attributable to ownership stakes held directly by domestic governments, rather than to foreign state ownership or investment via sovereign wealth funds. Difference-in-differences estimates show that state-owned firms reacted more significantly to the 2009 Copenhagen Accord in improving their environmental performance. Interestingly, state-owned firms also engage more in social issues, but they do not reveal better corporate governance performance.


state ownership, environmental engagement, sustainability, ownership structure


Finance and Financial Management

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Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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