The Role of Government Ownership in the Capital Structure of State-Owned Enterprises

Abstract

Using a sample of 340 privatized firms from 51 countries, I examine their capital structure after privatization and analyze the capital structure determinants of privatized firms. The results indicate that privatized firms have a target leverage ratio and it is independent of the remaining government ownership. The leverage choice of privatized firms is affected by a high level of information asymmetry and government’s future privatization agenda. In general, my study confirms the argument that privatized firms are unique and need to be separated from the sample of large firms when conducting international capital structure studies.