A comprehensive study on government-linked companies in Singapore with a specific look at economic downturns

Abstract

This study of 34 Government-Linked corporations (GLCs) of Singapore covering from 1991 to 2010 shows that Singapore GLCs perform as well as a selected group of non-GLCs that are matched by size and industry in terms of profitability, efficiency and output level. From the point of view of investors, Singapore GLCs have higher firm valuations which could be possibly explained by their superior corporate governance structures. Taking a special look at economic downturns and financial crisis periods, there was also no evidence showing that GLCs were less profitable than their counterparts of non-GLCs. However, we find that the relationship between government ownership and the change of firm valuation due to crisis is in an inverted U-shape. Given the above findings, we argue that Singapore GLCs are as efficient and profitable as private sectors and its corporate governance structure has some intrinsic merit.