FINANCIAL PERFORMANCE OF STATE-OWNED ENTERPRISES: DOES POLITICAL IDEOLOGY PLAY A ROLE?

Scant scholarly attention has been devoted to understanding whether incumbents’ political ideology shapes state-owned enterprises’ (SOEs) financial performance. This is concerning because SOEs operate beyond political cycles, facing pressures from governments with different compositions of the executive branch over time. In this paper, we hypothesize that the more right leaning the incumbent, the greater the SOEs’ financial performance. However, given that incumbents’ decisions are influenced by their political parties’ goals and behaviors, the effects of ideology may be nonlinear. Thus, we hypothesize that when right leaning incumbents’ parties display non-policy behaviors, rather than prioritizing policy-driven goals, the association of incumbents’ ideologies with SOEs’ financial performance is weaker. The analysis of a 2018-2022 panel of 317 SOEs controlled by 27 subnational governments in Brazil, comprising 1,116 SOE-year observations, confirms our hypotheses. We use panel data Feasible Generalized Least Square (FGLS) models, with a comprehensive set of control variables and heteroskedastic errors.