*2.3. Government Ownership and Firm Performance*

Few pieces of research have studied the impact of government ownership on firm performance. Fukuda et al. (2018) argued that the government, as a shareholder, can reduce companies' financing costs. A study on Vietnamese firms from 2004–2012 provides evidence that an increase of government ownership in large firms improves firms' ROA and ROE, while for middle and small firms, it hurts the same (Ngo et al. 2014). Similarly, a study on listed firms in Shanghai and Shenzhen Stock Exchange reveals a positive relationship between government shareholdings and firm performance (Sun et al. 2002). Ahmad et al. (2008) obtained similar positive results for the link between government ownership and firm performance, measured by both Tobin's Q and ROA, in Malaysian firms.

In the case of Japan, Fukuda et al. (2018) noted that the effect of government ownership on firm performance varies depending on the state of the company, such as good, normal, or bad (performance is measured based on operating profit ratios in previous years). Their study revealed that a negative relationship runs between government ownership and Tobin's Q for good and normal Japanese firms, while a positive association exists for the same for bad performing companies. Notably, unlike the private sector, the government neither pursues aggressive growth nor puts too much pressure on the management to improve their financial performance (Fukuda et al. 2018). With that being said, the higher the government's shareholding inside the firm, the less well-performed the firm is. Thus, we take the following hypothesis.
