Performance Assessment of Russian State-Owned Corporations Using a Composite of Financial and ESG Indicators

The result of comparison performance of private and state-owned companies on average indicates that private companies are more effective in operational and market performance. It happens because in companies with state ownership there are non-financial goals that are dictated by the state and may be in opposite to financial needs, which makes state-owned corporations less profitable and competitive in the market. Therefore, companies with state-ownership differ from private companies at the level of setting fundamental goals. In this study, we try to prove that the approach to evaluate the performance of state-owned companies should contain not only financial indicators, but also indicators which can be assumed as the results of non-financial goals imposed by state. To prove this statement, we investigate what indicators influence the performance of state-owned companies considering their financial and non-financial goals. For our analysis we use financial and ESG indicators of Russian state-owned companies from 2013 to 2018. As the result of panel data analysis, we find that social and environmental activities negatively affect and on operational performance and positively effect on market performance in some cases. We also find negative relationship between operational performance and political concentration in board of directors. We conclude that social and environmental initiatives and corporate governance indicators effect the financial results of the Russian state-owned company, and therefore should be included in an integrated approach to assessing the performance of state-owned companies.