Do firms with state ownership in transitional economies take more risk? Evidence from Vietnam

Abstract

Firms with government ownership in transitional economies are normally in advantageous position because they have many political and financial privileges. A question which naturally arises is that whether firms with government ownership need to take more risk to maintain competitive edge and obtain innovation. This paper sheds further light on that question by providing an investigation into the impact of government ownership on the firm’s risk-taking behavior in Vietnam, a successful transitional economy. The study uses a number of econometric techniques of panel data estimation for efficient and consistent results. Overall, the paper reports that firms with higher state ownership tend to take less risk-taking activities. This finding has strong policy implications relating to the privatization strategy in transitional economies.