State-Owned Enterprises

Paper Summary:

This paper critically and comprehensively focuses on both the rise and fall of State-Owned Enterprises (SOEs) using as case-studes, comparative literature from mainly the UK and the U.S. It also draws on experiences from the developing world. Since the world has become more technologically advanced and globalized, State-Owned enterprises (SOEs) have new roles that sometimes conflict with the fundamental objectives for which they were originally set up. This paper discusses constaints and problems and recommendations for SOEs to overcome the difficulties they face in today's world.

From the Paper:

"According to Hughes, Zeckhauser and Horn, there are agency problems that result from the application of Principal Agent Theory, (which is a microeconomic theory), to the public sector. The problem relates to that of ownership and control. Problems arise as regards whether if the enterprise is publicly owned, it will deliver goods and services more efficiently than the private enterprise. There is the problem in the public sector, according to Hughes, where it is difficult to establish who is the principal whether government or the public versus who is the agent. According to Zeckhauser and Horn, SOEs pay little attention to the interests of their taxpayer shareholders, and instead pay a great deal of attention to suppliers, consumers and employees, who can influence their management to grant them favors over the taxpayers (in Hughes, ibid 1994, p.139)."

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