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The purpose of this paper is to examine the relationship between state ownership and firm profitability in developing countries by considering the endogenous nature of state ownership and firm profitability.

A simultaneous equation analysis is applied to study 232 Tunisian firms over the 2001-2013 period. This analysis is compared with OLS estimates to show its power in terms of an endogenous setting and its potential to improve estimation.

Unlike the OLS estimates that show a non-significant relationship between state ownership and firm profitability, the simultaneous equation analysis reveals a non-symmetrical concave relationship. Specifically, state ownership affects positively firm profitability when it is relatively small and negatively when state ownership dominates. Specification test indicates that both state ownership and firm profitability are endogenous. Furthermore, the simultaneous model’s explanatory power exceeds that of OLS estimates and proves to be a suitable estimation technique.

Taking into account public firms’ categorization, the authors implicitly examine the effect of privatization and corporatization on firm profitability. The findings imply that privatization is not the only solution to the operational problems of public firms, but an internal governance system restructuring can also be favorable for these firms.

In addition to focusing on a new database of developing countries, the case of Tunisian firms, the main empirical analysis is conducted by considering the endogeneity issue. Thus, the findings improve understanding of the role played by state ownership and suggest that a partial state control appears to be beneficial to firm profitability.

The purpose of this paper is to examine borrowing capacity (BC) of government-owned firms and whether real earnings management (REM) activities moderate the sensitivity of firm BC to government ownership.

A simultaneous equation analysis is applied to study 210 Tunisian non-financial firms over the 2001–2014 period.

The empirical results provide substantial evidence indicating that government-owned firms have higher BC and significant REM than other firms; the relationship between government ownership and firm BC is partially moderated by REM activities.

The findings imply that the implicit credit guarantee of government is not necessarily the unique determinant of firm BC and highlight the role of lenders in monitoring discretionary real transactions in government-owned and protected firms. These implications should be taken in to account by public sector policy makers. In particular, the findings predict that the current government accounting reform in Tunisia on the basis of IPSAS will, probably, improve information quality, but it is still insufficient to control real activities in public institutions.

This study extends a growing research stream on the relationship between BC and government ownership by focusing on the moderating effect of REM on this relationship and by considering the endogeneity issue. The findings provide evidence that government-owned firms use REM practices to improve their BC. Examining these practices in developing countries provides an opportunity to evaluate the efficiency of their public sector reforms and their effect on a firm’s performance and financing decisions.

The purpose of this paper is to test the political costs hypothesis in emerging economies characterized by interventionist governments and weak protection of property rights. The paper uses executives’ political connection and state control to measure firms’ political costs.

Based on a sample of Tunisian firms, univariate and multivariate analyses are used to test whether firms’ political costs have any impact on earnings management.

The empirical analysis indicates that the executives’ political connection is not directly related to earnings management. However, the interaction between executives’ political connection and the state control affects the firm’s sensitivity to political pressure and its earnings management practices. More specifically, this study provides evidence that non-connected firms and state-controlled firms attempt to use accounting policies to decrease their earnings especially during periods of the former government when they had to face high political costs. This finding is robust to comparing means of political cost indicators between different groups. Indeed, private firms with political connection enjoy a significantly lower insurance right, tax and donations and grants compared to other firms.

This study provides empirical evidence for the specific application of accounting theory in emerging economies.

Political influence may be an important criterion that will be used by auditors and investors to appreciate and detect specific manipulations of accounting earnings. Similarly, regulators should be aware of the political factors effect on discretionary behavior of managers to provide appropriate rules and standards.

The study is a pioneer in proving that a firm’s size is not always a suitable measure of its political cost. It extends the accounting literature on the role of political economy in the application of the political costs hypothesis. This hypothesis is confirmed in emerging economies by providing new and significantly measure of firms’ political costs

The purpose of this paper is to investigate whether ownership structure affects earnings management in the banking industry of emerging markets.

The empirical study is conducted using a sample of 134 banks from 12 Middle Eastern and North African countries. Econometrically speaking, the study used a panel data regression analysis.

The authors found convincing evidence that banks with more concentrated ownership use discretionary loan loss provisions to manage their earnings. The authors also found that state and institutional owners encourage earnings management, while family owners reduce this practice.

The findings would be valuable for investors since they should take into account ownership structure in order to reach a better investment decision. Moreover, regulatory reforms in emerging markets should push for more transparency about ownership structure, high levels of supervision, and external audit quality.

This study presents international evidence on the prominent role of owners in earnings management in emerging markets with weak shareholder rights protection.

The purpose of this paper is to introduce the special issue on state-owned enterprises (SOEs) in the contemporary global business scenario. Against the theoretical background of and the invited themes for the special issue, the paper presents a summary of key findings and practical implications of the accepted papers and suggests future research directions.

The paper is conceptual, which organized through utilitarianism or legitimism; SOEs scenario 1 – hungry fox, hunting bears; SOEs scenario 2 – dancing elephant, flying bears; what do we know and what we wish to explore; what have been examined; what we need to study further; closing note by bears’ well-wishers; and protocol of the special issue.

By deeply looking into emerging economies (China, India), developed economies (Denmark, Italy, Sweden), transition economies (Tunisia) and diverse sectors (public transport, space), coupled with cross-country sample data, the nine accepted papers have discussed several interesting findings and recommended numerous implications for the policymakers and SOEs’ managers. Drawing upon the interdisciplinary literature, empirical and qualitative papers would deepen the understanding of the growth strategies and performance of SOEs, and the application of management theories such as institutional theory, agency theory, social exchange theory, managerial grid theory, incomplete contracts theory and public governance view, among others. The issue also brings a review-cum-citation analysis paper on the impact of privatization on the performance of SOEs.

The papers have made unique contributions to the public economics, new public management, international business and organizational development literature by critically analyzing the burgeoning phenomenon of the changing dynamics and globalization of SOEs.