Corporate governance and productivity in SOEs: The role of political connectedness Polona Domadenik Faculty of Economics University of Ljubljana.

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Presentation transcript:

Corporate governance and productivity in SOEs: The role of political connectedness Polona Domadenik Faculty of Economics University of Ljubljana

Short outline of presentation Motivation Institutional background The role of political connections: the effect on productivity Discussion

Motivation 1.Specific privatisation method was efficient for small and medium sized firms but not in big firms 2.The crisis hit Slovenia more than other CEE countries 3.Is appointing board members on political rather than on professional merits corruption?

Institutional background Slovenia was the role model for other transforming economies Privatization: few foreign capital involved Ownership consolidation and creating new business elites Inefficient governance of SOEs

The role of political connections: sample selection Data on Supervisory Board members in 308 big & medium- sized Slovene firms (manufacturing & service) after > individuals (women: 19,2 percent)  25 percent of supervisors were appointed at least twice 46 percent of them were politically affiliated

Supervisory board structure and productivity of firms Number of supervisors Share of women in SB

Share of politically connected members by ownership

Politicans as supervisors in selected industries

The effect of supervisory board structure on productivity Positive effect of women board members -Important difference between tradable and non- tradable sectors Negative effect of politically connected board members

Discussion and implications - Harmful practices have been identified -Important short and long term effects: appointing one member in 5-member SB would decrease productivity by 2.3 percent next year and by 9.6 percent in the long run -Improving governance (political accountability) and/or privatisation?