In Strange Company: The Puzzle of Private Investment in State-Controlled Firms

摘要

In this Article, we addressed the puzzle of mixed enterprise. How can we explain the very existence of these firms? Why do private investors agree to be minority shareholders in companies controlled by governmental entities with objectives that may drastically differ from profit maximization? From the perspective of a social planner, there is evidence that the coexistence of minority private investors with state actors can generate improvements in operational and financial performance. Yet, from the perspective of private shareholders, their investment must pay off. We identified three different factors that explain private investor interest: (1) the existence of countervailing privileges from partnering with the government, (2) improved corporate governance and legal constraints that limit the opportunity for political abuse, and (3) ex-ante price discounting.