Singapore Inc. Versus the Private Sector:

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Singapore Inc. versus the Private Sector: Are Government-Linked Companies Different?

Author(s): Carlos D. Ramrez and Ling Hui TanSource: IMF Staff Papers, Vol. 51, No. 3 (2004), pp. 510-528Published by: Palgrave Macmillan Journals on behalf of the International Monetary FundStable URL: http://www.jstor.org/stable/30035960 .

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IMF taffPapersVol.51, No.3c 2004 InternationalMonetary und

Singapore Inc.Versushe PrivateSector:AreGovernment-Linkedompanies Different?CARLOS .RAMIREZnd LINGHUITAN*

Government-linkedompanies(GLCs)have a significantpresence in Singapore'scorporate sector. Unlikeparastatals in many other countries, these companiesare run on a competitive,commercialbasis, ostensiblywithoutgovernmentpriv-ileges. Based on datafrom publicly listed GLCsand non-GLCs,we indeedfindno evidence that GLCs have easier access to credit. However,we do find thatbeing a GLCis rewarded nfinancial marketswith a positive premium,over andabove what can be explained by the usual determinantsof Tobin'sq. [JELL32,L33,G32]

A s partof its postindependencendustrializationlan,theSingapore ov-ernmentassumeda proactiveentrepreneurialole by establishing tateenterprisescalledgovernment-linkedompanies, rGLCs) n keysectorssuchasmanufacturing,inance, rading,ransportation,hipbuilding,ndservices. nthisrespect,Singaporewas differentromHong KongSAR,whoseeconomicgrowthwas drivenby private nterprises, ndotherEastAsian economies ikeJapan,TaiwanProvinceof China,and the Republicof Korea,where activeindustrialolicydidnot nvolvewidespreadovernmentwnershipf enterprises.By mostaccounts,his strategy f "statecapitalism"asbeenquitesuccessful.GLCshaveevolved nto animportantationalnstitution,ndthemajor ompa-nies havebecomewell-recognizedorporateamesregionally ndeven-in thecaseof SingaporeAirlines-globally.

*CarlosD. Ramirezs AssociateProfessor f EconomicsatGeorgeMasonUniversity.LingHuiTanis a SeniorEconomist n the IMFInstitute.The viewsexpressedn thispaperarethose of theauthors nddo notnecessarily epresenthoseof the IMFor IMFpolicy.The authors hankAndrewFeltenstein,RobertFlood,CelineSia,and seminarparticipantst the IMFInstitute orhelpfulcomments.

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SINGAPORENC,VERSUSHE RIVATEECTOR

Unlike parastatalsn manycountries,Singapore'sGLCs bear a close resemb-lance to private nterprises.Thegovernment ubscribes o what has been termed he"managerial iew"in theongoingdebateon publicversusprivateownership,whichargues hatcompetition ather hanownershipperse is thekey to efficiency.'GLCsare runon a commercialbasis,with a focus on bottom-lineperformance.Theyhavenot been used for social or employment-generation urposes.They competewithprivate irmsandmultinational ompaniesand, n somecases,with eachother.Manyof them have beenpartiallyprivatizedand are listed on the local stockexchange.Yet,while GLCs haveundoubtedlybeen a majorelement in Singapore'seco-nomic development,there recently has been an active debate concerningtheirfuture role in the economy.2Criticism of GLCs falls into two broadcategories.The first contends that GLCs tend to do better thanprivatesector firms becausetheir institutionalrelationshipwith thegovernmentgives themspecial advantagesin terms of access to funds, tenders,and opportunities;consequently, they haveclosed largeareas of the economy to the privatesector and stifled entrepreneur-ship. The second contendsthat GLCs tend to do worse thanprivatesector firmsbecause theirmanagersaremainly civil servantswho lack business acumen,andtheir investmentsmay be politically, rather hancommercially,motivated.The purposeof this paper s to investigatethe differencesbetweenGLCs andprivatesector firmsempirically.To ourknowledge, this has not been attempted ofar;the discussion has been mostly anecdotal.Using data on publiclylistedGLCsand a controlsampleof non-GLCs,we consider two questions:(1) Do GLCs ben-efit from special financial advantages?and (2) Do the financial markets valueGLCs and non-GLCsdifferently,and if so, why? We examine the first claim bycomparing he investmentbehaviorof GLCs andnon-GLCs-if GLCsdo indeedreceivepreferentialinancing, heywould tend to be less liquidity-constrainedhannon-GLCs.Next,we runTobin'sq regressions o findoutif government wnership/affiliationmakes a difference to the marketvaluationof a company.

I. BackgroundTojump-start ndustrializationn the late 1960s, the Singapore governmentcre-ated GLCs andstatutoryboards o spearheaddevelopment n varioussectors of theeconomy.3The statedrationale or this strategywas to compensatefor the lack of

SThealternative iew, termed he "political iew" or "ownership iew,"maintainshatgovernment-ownedenterprisesre ntrinsicallynefficientbecausegovernments ursue bjectivesn additiono,and nconflictwith,profitmaximization,ndthispolitical nterference an distort heobjectivesandconstraintsfacedby managers f suchenterprises. ee Shleifer 1998)for anexampleof thisview,and Bardhan ndRoemer 1992) for anexampleof themanagerial iew.2Thisdebatewassparked y thereleaseof areport y a government-appointedommittee n the roleof thegovernmentnbusiness Singapore,EconomicReviewCommittee, 002);thecommittee's inalrec-ommendations re summarizedn Singapore,Ministry f TradeandIndustry2003).An earlierdebate-reflectingmanyof the samearguments-occurredn the late 1980s,whenseveralpublicenterpriseswerefullyorpartially rivatized.3Statutoryoardsare egislatedunder ndividual cts of Parliamenthatdefinetheir unctions, cope,andpowers; heyare formedundervariousministriesand areaccountable o themthroughParliament.GLCsare ncorporatednder heCompaniesAct anddo not come under he directpurviewof Parliament.BothGLCsandstatutory oards an formtheirown subsidiaries ndassociated ompanies.

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privatesector fundsor expertise.Pioneer GLCs includedthe Keppel,Sembawang,and Jurong Shipyards,which spurred he developmentof Singaporeas a majorshipbuildingand ship repaircenter;the DevelopmentBank of Singapore,whichwas set up to provide development financing;and NeptuneOrientLines, whichwas formed o leverageon the island'sstrategicocation.Some GLCswere setupforstrategicreasons,notablyChartered ndustriesand Allied Ordnance n the defenseindustry.Manyof theseearly companieswerejoint ventureswithforeign nvestors.Forexample,the SingaporeRefiningCompany,whichprovided he catalyst or thegrowth of the oil refining industry,was a joint venture with Caltex and BritishPetroleum,while the PetrochemicalCorporationof Singapore,which launchedSingapore's ntry nto thepetrochemicalsndustry,wasajointventurewith Shell anda Japanese onsortium.In 1974, the government through he Ministryof Finance)establisheda lim-ited holding company,TemasekHoldings, to manageits investments n GLCs. Atthattime, 36 companieswere transferred o Temasek'scontrol.4Since then,rapideconomic growthhas afforded GLCs the scope and opportunities o expandanddiversifytheiroperations.The 1980s and 1990s also saw the corporatization f anumberof statutoryboards nto GLCs.5Today,the total numberof GLCs is esti-mated to be in the hundreds.TemasekHoldings directlyholds 22 first-tierGLCs,all of which have subsidiariesor associate companies, which in turn often havethird-tier ubsidiaries,and so on. The companiesare involvedin a wide rangeofsectors, includingfinance,telecommunications, ransportand logistics, property,infrastructurendengineering,and utilities.Temasek Holdings and its subsidiaries are registeredcompanies under theCompaniesAct, subjectto all the same requirements s privatebusinesses.Manyof its companiesare listed on the SingaporeExchange.Accordingto Temasek, hemajor listed companies account for more than 20 percent of the total marketcapitalization.6Inaddition o GLCshelddirectlyor indirectlyby TemasekHoldings,there arealso a numberof enterprises hatarefully or majorityownedby statutoryboards.Suchenterprisesmayalso be classifiedas GLCs,to the extent that their sharesareowned ultimately by the government.An example is the ComfortGroup,a pub-licly listed land transportation ervices conglomerate owned primarily by theSingaporeLaborFoundation a statutoryboard).

Accordingto the government,GLCs operate fully as for-profitcommercialentities,on the same basis as privatesectorcompanies:They areexpectedto pro-

4Two otherholdingcompanieswere set up around he sametime: MND Holdings(ownedby theMinistryof NationalDevelopment) ndSheng-LiHoldings ownedby the Ministryof Defense).MNDHoldingswassubsequentlyakenoverby theMinistry f Financeandthe bulkof its GLCs ransferredoTemasek.Sheng-LiHoldings nowSingaporeTechnologies)s responsibleor defense-related LCs.5Forexample,the Telecommunicationsuthorityof Singaporewas converted o SingaporeTele-communicationsn 1992, the PublicUtilitiesBoard'selectricity ector unctionswerespunoff to createSingapore ower n 1995,and he PortAuthorityf Singaporewas convertedntoPSACorporationn 1997.6The isted irst-tierompanies reDBSBank,KeppelCorporation, eptuneOrientLines,SembCorpIndustries,SingaporeAirlines, SMRT Corporation, nd SingaporeTelecommunications. ee http://www.emasekholdings.com.sg/.

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vide commercialreturns,commensuratewith risks taken;they are subjectto thesameregulations ndmarket orces asprivate ntrepreneurs;ndtheydo notreceiveany subsidies or preferentialreatment rom the government. n an early surveyofpublicenterprisesn Singapore,Lee (1976,p. 57) concludes hat"[g]overnmenton-trol is in factveryloose"andthatthegovernment"normally oes not interferewiththe managementof the companiesdirectly."Lee (1976, p. 58) furthernotes thatGLCsappear o receivefew, if any,special privilegesby virtueof theirgovernmentownership:

Taxholidaysand taxconcessionsareappliedgenerally o all companiesas longas theyfulfill theconditionsof pioneer tatusandexportorienta-tion. Most of thepublicenterprises btaincredit rom theDevelopmentBankof Singapore, ut the interest ate s usuallynot lower thanthatofotherbanks.... A few government ompaniesmay secure orders ofgoodsandservices romgovernment epartments. few saidtheymightsqueezea lowerpricefromsuppliersof inputof materialsbecause heyweregovernment-owned... To the question,"whetherheycan obtainprior nformationegardinghe government'suturepolicy measures,"practically ll of themrepliednegatively.

The mainadvantageof governmentownershipappears o be the positive sig-nal it sends to the markets. The following statement by a GLC manager, cited inLow (1991, p. 65), sums it up: "Being linked to Government s of course useful.Itgives thecompanycredibilityandnobodywill thinkyou are a fly-by-nightoper-ation. But the companyhas to justify itself and earnits keep by marketingrightproductsat the righttime as no favours aregiven or expected."Indeed,manyGLCs have consistently posted a strongfinancialperformance.But the rapidgrowthof GLCs-both in size andin number-has led to concernsthatthey are encroaching nto too many industries,effectively crowdingout theprivatesector andhinderingthe developmentof a critical mass of thrivinglocalenterprises.Among small- and medium-sizedprivateenterprisesin particular,GLCs are stillperceivedto haveunfairadvantages n termsof access to funds,ten-ders, andopportunities.Othercritics arguethatGLCs are less efficient thanpri-vate sector firms, due to their institutionalrelationshipwith the government, hemarketstructure n whichtheyoperate,or themanagement ystems appliedwithinthem. Forexample,GLCmanagersareusually appointed rom theranksof seniorcivil servantsandmilitaryofficers;and,while they aregenerallyof a high qualityand promotedon the basis of their performance-the Singaporeancivil servicebeing "an extremeexample of a meritocracy" Krause, 1987, p. 119)-they havealso been criticized forbeing too risk-averseandlackingsufficiententrepreneurialdrive.7Therehave also beenchargesthatcertainGLCinvestmentshavebeenpolit-ically ratherthan commerciallymotivated.And being linked to the governmentmay sometimes be a hindranceratherthan an advantage; n recent years, some7Inrecent ears, omeof the argeGLCs awmanagementhake-ups,ithnewsenior xecutives

broughtn from heprivateector nd ome romabroad. numberf these oreignxecutivesubse-quentlyeftbefore ompletingheir ontracts. hegovernmentasput hisdown ocoincidence, ain-taininghat t doesnotplaya directole nrecruitmentecisionsmade ytheGLCs' oards.

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Carlos D.Ramirezand LingHuiTancountrieshave been reluctant o allow SingaporeanGLCs to invest in sectors con-siderednationallystrategic.8

II.Data and DescriptivetatisticsThere is very littlepubliclyavailable nformationon GLCs in Singapore.TemasekHoldingslists its majorcompanieson its website,but not all of its (numerous) ub-sidiariesand associatedcompanies.In fact, the definitionof a GLC has itself beenthe source of somecontroversy.Singapore'sDepartment f StatisticsdefinesGLCsas companiesin which the government'seffective ownershipof voting shares is20 percentor more.9However,as arguedn UnitedStates,StateDepartment2001),this definitionexcludesmanysecond-or third-tierGLC subsidiaries.Forexample,if Temasekowns 50 percentof a first-tierGLC,and that GLC owns 30 percentofa subsidiary,he effectivegovernmentownershipof the subsidiarys calculated obe only 15percent;as a result,the subsidiary s not considered o be a GLC. It canbe arguedthatcompaniesin which the government's ormal shareholdings lessthan 20 percentshould still be consideredgovernment-linked,ven if they are noteffectivelygovernment-owned. orexample,if the other shareholdersndividuallyown a miniscule fractionof the company,a mere5 percentgovernmentownershipcanentail de facto controlof thecompany.Thus,thegovernmentmaybe thelargestshareholderandthereforehave a controllingstake)with an ownership ractionofless than 20 percent f the other shareholders re atomistic.For thepurposesof thispaper,we classifya firm as a GLCif one of its substan-tial shareholderss TemasekHoldingsor a statutoryboard.(Underthe CompaniesAct, an individual s considered o havesubstantialhareholdingn a company f heorshe has aninterestn 5 percentor more of thevotingsharesof thatcompany.)Firmdata, includinginformationon shareholders,were obtained from the CorporateHandbook,supplemented,where necessary, by informationfrom the SingaporeExchange'swebsite.A list of GLCs and the controlgroupof privateenterprisesspresentedin Table 1. We focus on only threesectors-manufacturing; transport,storage, and communications(TSC); and multi-industry-as these are areas inwhich GLCshave a significantpresence.10We were able to obtainadequatedatafor theperiod1994-98 for a sampleof 17GLCsand92 privateenterprisesn thesethree sectors.

Table2 presents ummary tatistics or thesample.Thefigurespresentedoreachgroup(GLCandnon-GLC)aremeans, medians,and standard eviations, alculatedfor all firmsand all years.Note thatthe averageGLC is almost 10 timesas largeastheaveragenon-GLCn termsof capitalstock(fixed assets).Aside fromthis,the twogroupsof firms have a roughlysimilar set of characteristics.Duringthe sampleperiod,GLCsreported lightly oweraverage ash flow andgrosssales(proportional8In1999-2000,SingaporeTelecommunicationsas defeatedntakeover ttemptsnHongKongSARandMalaysia argely or this reason.9SeeSingapore,Departmentf Statistics 2001).The ist of GLCsaccordingo this definitionwas not

published.10GLCs realso stronglyrepresentedn the financialandproperty ector,but the characteristicsffirms n these sectorsdo not lend themselveswell to ourempiricalramework.

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Table 1. Sample CompaniesGLCs Sector PrivateEnterprises SectorComfortGroup TSC Ace Dynamics ManufacturingCWTDistribution TSC AcerComputernternational ManufacturingDelGroCorp. TSC Acma Multi-industryIntraco Multi-industry AllianceTechnology& Devt Multi-industryJurongShipyard Manufacturing AmtekEngineering ManufacturingKeppelCorp. Multi-industry Armstrongndustrial orp. ManufacturingKeppelHitachiZosen Manufacturing Asia PacificBreweries ManufacturingKeppelMarine ndustries Manufacturing AvimoGroup ManufacturingNatSteel Multi-industry AztechSystems ManufacturingNeptuneOrientLines TSC Berger nternational ManufacturingSembCorpLogistics TSC BritishAmericanTobaccoCo.(S) ManufacturingSingaporeAirlines TSC BroadwayndustrialGroup ManufacturingSingaporePetroleumCo. Manufacturing BurwillHoldings ManufacturingSingaporePressHoldings Manufacturing CAM International oldings ManufacturingSingaporeTelecoms TSC CarnaudMetalboxsia ManufacturingSNPCorp. Manufacturing CerebosPacific ManufacturingTimesPublishing Manufacturing ChuanHupHoldings TSCClipsal ndustriesHoldings) ManufacturingCompactMetalIndustries ManufacturingCoscoInvestmentsS) TSCCreativeTechnology ManufacturingDatapulseTechnology ManufacturingEasternPublishing ManufacturingElec & EltekInternational o. Manufacturing

EltechElectronics ManufacturingFalmac ManufacturingFirstEngineering ManufacturingFraser& Neave ManufacturingFreightLinksExpressHoldings TSCFu YuManufacturing ManufacturingGBHoldings ManufacturingGeneralMagnetics ManufacturingGikenSakata S) ManufacturingGP Batteries nternational ManufacturingGPEIndustries ManufacturingHaw ParCorp. Multi-industryHaw ParHealthcare ManufacturingHBMPrint ManufacturingHesheHoldings ManufacturingHoWahGenting nternational ManufacturingHotelProperties Multi-industryHwaHong Corp. Multi-industryHwaTatLee Holdings ManufacturingIMCHoldings TSCInter-Roller ngineering ManufacturingIPCCorp. ManufacturingJayaHoldings TSCJurongCement Manufacturing

(continued)

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Table 1. (concluded)GLCs Sector PrivateEnterprises Sector

LiangHuatAluminium ManufacturingLionAsiapac ManufacturingMetalock S) ManufacturingMHEHoldings ManufacturingNationalKap ManufacturingNetworkFoodsInternational ManufacturingNippecraft ManufacturingOmniMold ManufacturingOspreyMaritime TSCPacificCanInvestmentHoldings ManufacturingPacificCarriers TSCPanPacificPublicCo. ManufacturingPCI ManufacturingPentex-Schweizer ircuits ManufacturingPokkaCorp. S) ManufacturingPowermaticDataSystems ManufacturingPrima Multi-industryQAF ManufacturingRothmans ndustriesHoldings ManufacturingRotolSingapore ManufacturingSan Teh ManufacturingSeksunPrecisionEngineering ManufacturingSimeSingapore Multi-industrySingamasContainerHoldings ManufacturingSingatronics Multi-industrySM SummitHoldings ManufacturingSunright ManufacturingSuperCoffeemixManufacturing ManufacturingSuperiorMetalPrinting ManufacturingTeckwah ndustrialCorp. ManufacturingThe StraitsTradingCo. Multi-industryTIBSHoldings TSCTongMengIndustries ManufacturingTotalAccess Communication TSCPublicCo.Tri-MTechnologies S) ManufacturingTuanSingHoldings Multi-industryUnitedEngineers Multi-industryUnitedIndustrial orp. Multi-industryUnitedPulp& PaperCo. ManufacturingVentureManufacturingS) ManufacturingWassallAsia Pacific ManufacturingWBLCorp. Multi-industryWepco ManufacturingYeoHiapSeng Manufacturing

Note:TSC s transport,torage,andcommunications.

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Table 2. Summary StatisticsStatistic GLCs Non-GLCsNumber f firms 17 92Investment*Mean 0.14 0.14

Median 0.10 0.04Standard deviation 0.22 0.39Cashflow*Mean 0.31 0.44Median 0.23 0.20Standard deviation 0.38 1.16

Gross sales*Mean 2.58 4.15Median 1.44 2.24Standard deviation 3.98 7.42

Liquid assets*Mean 0.87 0.87Median 0.45 0.28Standard deviation 1.01 1.78

q Mean 1.83 1.65Median 1.44 1.44Standard deviation 1.21 0.85

ROAMean 6.06 3.91Median 5.43 4.35Standard deviation 7.69 10.62

Debt-equity atioMean 0.91 0.97Median 0.61 0.71Standard deviation 0.94 1.71Totalassets(S$ million)Mean 3,558 922Median 844 141Standard deviation 5,815 5,281Fixedassets(S$ million)Mean 1,407 149Median 301 46Standard deviation 2,621 367*Proportionalo fixed assets.

to capital tock)comparedwithnon-GLCs; veragenvestment nd iquidassets(alsoproportionalo capitalstock)were almost dentical or the two groups.The mediansof these variables realwayssmaller han hemeans, ndicatinghat heirdistributionsare skewedby somelargevalues.This is truefor bothGLCsand non-GLCs.Table2 also presents he value of q, a proxyfor Tobin'sq (themarketvalueofthe firm relative to its replacementcost). Here,q is approximatedby the marketvalue of common equity stock plus the book value of debt andpreferredstock,

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CarlosD. Ramirezand LingHuiTandividedby the book value of total assets. Duringthe sample period, the averageTobin'sq for GLCs exceeded the average q for non-GLCsby about 10 percent,althoughthe medianq values were comparable or the two groups.Weinvestigatedifferences in Tobin'sq further n Section IV.

Finally,Table 2 shows the profitabilityof the two sets of companies,as mea-suredby the returnon total assets (ROA),which is the ratio of pretaxnet profitsplus interestpaymentsto total assets (bothequityandnonequitycapital).By thisindicator,GLCsappear o be moreprofitableon average hannon-GLCs.However,the standard eviationsare so largethatthe differencebetween the two meansis notstatisticallysignificantat standard evels.ll This can be verifiedby looking at themedians,which are much morecomparablebetween the two groups.Furthermore,this accountingratio has well-known weaknesses-for example, it reflects onlypast profitability,s not adjusted or risk,and tends to be subjectto manipulation.We discuss this further n SectionIV.

III.AreGLCsLessLiquidity-Constrained?A recurring harge againstGLCs is thatthey enjoy financialprivilegesand do notcompeteon an equal footing with privateenterprises.Krause(1987, p. 119), forexample,asserts that GLCshave a "natural dvantage .. in marshalling inancialresources," ecause"thegovernment avesmore than t invests,and thusalwayshaseasy access to finance."Chargesof cheap fundingfor GLCs were also made morerecentlyby two membersof Parliament uringa parliamentaryebate astyear.12There are different ways in which GLCs could potentially receive cheapfunding-government loan guarantees,concessional interestrates,and generousrepaymentperiodsare some examples that come to mind.However, t is virtuallyimpossible to obtain dataon the termsof borrowing or each firmandeach proj-ect. Hence, a direct test of preferential redit access is not feasible,and we have toresort to an indirecttest.One useful way to test-indirectly-if GLCs have indeed received financialadvantages s to comparetheirinvestmentbehaviorwith that of theirprivatesec-torcounterparts.Accordingto theimperfectcapitalmarkets iterature,problemsofasymmetric nformationbetween borrowersand lenders(suchas adverseselectionand moralhazard)makeexternal inancingmorecostly than nternal inancingformanyfirms. If lendershaveimperfect nformationaboutthequalityorriskiness ofthe borrowers' nvestmentprojects, adverse selection will lead to the so-called"lemons"premium,a wedge betweenthe cost of external inancingandinternallygeneratedfunds. In the presenceof incentiveproblemsandcostly monitoringofmanagers,external lenders will requirea higher returnto compensatethem forthese monitoringcosts andthe potentialmoral hazardassociatedwith managers'(i.e., borrowers')controloverthe allocationof investment unds.To the extent thata firm'smanagers hemselvessupplythe funds for investmentprojects, he shadowcost of these fundsneed not carrysuch a premiumreflectingadverse selection or

11he t-statisticorthedifference n means s 0.99 for the ROA.12SeeSingapore,Ministry f Information2002).

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moralhazard.13irms hatfind it too expensive o raisecapitalexternallywouldthustend to rely more on internal unds to finance theirinvestmentspending,so theirinvestmentspendingwould tend to be stronglycorrelatedwith theirliquidity-allelse constant,moreliquidfirmswould be able to afford to invest more.If GLCs have preferentialaccess to financing(whetherit be throughlowerinterest rates or governmentguarantees), his means they find it cheaperto raiseexternalfundscomparedwith theirprivatesectorcounterparts.f this is the case,liquidityshouldbe irrelevantoratleast less important) s a determinant f GLCs'investmentspending.Thetest,therefore, nvolvescomparing hedifferences n theeffects of variousdeterminants f investmentspending by GLCs andprivatesec-tor companies:If GLCs have better access to credit,then theirinvestmentspend-ing shouldbe less sensitive to a liquiditymeasure ike cash flow thanwould be thecase for theirprivate-sector ounterparts.The idea for this test is not new.Previousempiricalstudies havedetermined-

underavarietyof settings--that irmsthatwouldappearo face thegreatestproblemsraisingcapitalexternallyend to cut investmentmost in response o cash flow short-falls. Forexample,Fazzari,Hubbard, nd Petersen 1988) use datafrom Americanmanufacturingirms, dentifying irmsthatretaina smaller ractionof theirearningsas beingless liquidity-constrained;oshi,Kashyap,andScharfstein1991) use datafromJapanesemanufacturingirms,identifying irms linked to a keiretsuas beingless liquidity-constrained;ndRamirez 1995) uses datafrom Americancompaniesin the 1910s, identifyingfirmsaffiliatedwith J.P.Morganas being less liquidity-constrained.14More recently and closer to our subject,Harrisonand McMillan(2001) use data fromC~te d'Ivoire to test if foreignfirmsandstateenterprises reless credit-constrainedhandomesticprivate irms.The regression specification for these tests is essentially a reduced-forminvestmentequation,with gross investmentregressedon the standard xplanatoryvariables,q and gross sales, as well as on liquiditymeasures such as cash flow.Ourspecification s based on thatused in Hoshi, Kashyap,andScharfstein 1991),andtakes the following form:

I, lSALESl,

_ CASH, (LIQ1= Po + p1q


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Carlos D.Ramirezand LingHuiTanThe dependentvariable s investmentduring periodt (I,) as a proportionof capi-tal stock at thebeginningof periodt (K,/1).The independentvariablesareaverageTobin'sq at thebeginningof periodt (qt-1); lagged gross sales (SALES,_1)relativeto capitalstock; cash flow during period t (CASHt)relative to capitalstock; thestock of liquidassets at the beginningof periodt (LIQ,_1) elativeto capitalstock;and the same four variables nteractedwith a dummy(GLC),which takes the valueof 1 for GLCs and 0 otherwise.15The motivation or thisregression s set outin Hoshi,Kashyap,and Scharfstein(1991) andalso discussedin detailin Hubbard 1998); we brieflyreview the gen-eral idea behindit below.Neoclassical investment theory predicts that a firm's investment spendingshoulddependpositivelyon its investmentopportunities,hat s, theexpectedpres-ent value of futureprofitsfrom additionalcapitalinvestment.This expectation scapturedby the value of marginalq, the shadow value to the firm of an additionalunit of physical capital.As a proxyfor marginalq, which is unobservable,we useaverageTobin'sq at thebeginningof eachperiod,qt-1.16Theempirical nvestmentliterature inds that investmentspendingis also positively correlatedwith laggedoutputvia the accelerator ffect. We use lagged gross sales, SALESt1, o proxyforlagged outputas an explanatoryvariableto capture his effect. In the absence offriction,these two variablesshould be sufficient for explaining nvestmentspend-ing behavior. The imperfect capital marketstheory extends these conventionalmodels of investment o incorporate role for financingconstraints n determininginvestment.As explainedabove, models of asymmetric nformationand incentiveproblems n capitalmarkets mplythat nformation osts and the internal esourcesof a firm influence the shadow cost of external unds for fixed investment,holdingconstantunderlyingnvestmentopportunities.Simply put,the theorypredicts hat,all else being equal,investmentshouldbe significantlycorrelatedwith the changein net worth(internal unds) for firms that are likely to face information-relatedcapitalmarket mperfections.The standard roxyforliquidity s cashflow (CASHt),thatis, income after tax plus (accounting)depreciationess dividendpayments.17Following Hoshi, Kashyap,and Scharfstein 1991), we also includea stock mea-sureof liquidity, hat s, the firm's stockof cashand short-term ssets such as mar-ketable securitiesat thebeginningof theperiod(LIQt-l)-these are assetsthat canbe readilyconverted o cash to financeinvestment pending.

One potential concern with the regression specification is that cash flowcould be correlated with other determinantsof investment, such as expected15Analternative pproachwould be to estimate he investmentegressions eparatelyor GLCsandnon-GLCs.However,we prefer he specificationn equation 1) becausewe are interested n the differ-ence in investmentbehaviorbetweenGLCs andnon-GLCs, ather han the determinantsf investment

spending or eachgroupof firmsperse.16Asnoted n Hubbard1998),this is allowableunder ertainassumptions,ncludingperfectcompe-tition n the factorandproductmarkets, omogeneity f fixedcapital, inearhomogeneity f productiontechnologiesandadjustmentosts,and ndependencef financing nd nvestment ecisions.17Asdiscussed n Hubbard1998),cash flow is an imperfectproxyfor thechange n net worth.Forexample, he determinationf a firm'scash flow mayreflectaccounting ecisions timingandfinancial)thatmuddy ts correlationwith thechange n networth.However,n manycases, it is thebestavailableproxy.

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future profitabilityor sales. If this is the case, a link between cash flow andinvestment for a given firm over time could be reflecting the link betweenexpected profitabilityand investment,and a cross-sectional link between cashflow and investment at a point in time could be reflectingthe fact that firms withhigh cash flow have successful investments or low costs and face incentives toexpand production.However,the inclusion of Tobin'sq andgross sales as regres-sors should control for these factors, as the component of shifts in net worthaccounted for by changes in currentand expected futureprofitabilityshould becaptured n gross sales andq.Of course, the average (Tobin's) q that we use may be a poor proxy formarginalq, the theoreticalconstruct hatis a measureof investmentopportunities,so anotherpotential problemwith the regression is the (mis)measurementof q.However,the pointof ourregression s to comparethe cash flow andliquidassetscoefficients for the two sets of firms. This difference should be unbiased as longas the mismeasurement s the same for both sets of firms.A third source of concern could be selection bias-selection bias would be aproblem f there is endogeneitybetween GLCs andliquidityconstraints, hatis, ifthe government omehow chose only less-liquidity-constrainedirms to be GLCs.But as noted earlier,many GLCs were createdin the late 1960s andearly 1970sas partof the government'sstrategyto spearheaddevelopment n various sectorsof the economy; the GLCs in our sample were mostly incorporatedduringthatearly period.It would be difficult to argue hatthegovernment ouldperfectlypre-dict the performanceof these GLCs at the time of their creation. Oursample ofGLCs does not containanyinstanceof the governmentcherry-pickingprivatesec-torfirms andconverting hem into GLCs. As the GLCs in our sampleare histori-cally determined, hen, for the purposesof statistical nferenceduringthe sampleperiod,we treatbeing a GLCas an exogenous event.Equation (1) is estimated using ordinary least squares (OLS) with fixedeffects. (Firmandyeardummieswereincluded n eachregression.)Theregressionresults, shown in Table 3, column 1, indicate that the liquidityvariables-cashflow and the stock of liquid assets-are indeed important xplanatoryvariables.The other explanatoryvariables also have the right signs and are statisticallysignificant.As our focus is on the difference between GLCs and non-GLCs, we areinterested in the coefficients on the interaction terms involving the liquidityvariables. If GLCs are less liquidity-constrainedhannon-GLCsin their invest-ment decisions, then the coefficient on GLC x (CASH, / Kt-1) and GLC x(LIQt-1 Kt-1)should be negative and significant. Table3, column 1 shows thattheGLC cash flow coefficient is smaller hanthenon-GLCcash flow coefficient~-as evidencedby the negativecoefficient on the interaction erm,GLCx (CASHtK/_1)-but the difference between the two cash flow coefficients is not signifi-cant. The GLC liquid assets coefficient is larger than the non-GLC cash flowcoefficient-as evidenced by the positive coefficient on the interactionterm,GLCx (LIQt 1 / K/_l)-but again, the differencebetween the two coefficientsis not significant. Hence, our tests show no statistical difference between theGLC and non-GLC liquidity coefficients. This indicates that the GLCs in our

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Table 3. Regression Results: Liquidity(1) (2) (3) (4)

Dependent Full Multi-industry TSC ManufacturingVariable: Sample (excluding (excluding (excludingIt K-1 small small smallnon-GLCs) non-GLCs) non-GLCs)CASH, K,-1 0.142" 0.195 -0.279 0.115(0.051) (0.274) (0.178) (0.100)LIQ,- / K,-1 0.082* 0.222* 0.254 0.093(0.022) (0.087) (0.295) (0.059)SALESt-IK,-1 0.018" -0.020 0.257 0.097*(0.007) (0.050) (0.168) (0.019)qt-1 0.124" -0.064 1.228" 0.111"(0.037) (0.277) (0.375) (0.046)GLCx (CASH, K,-1) -0.143 -0.029 -0.185 -0.021(0.319) (1.047) (1.426) (0.431)GLCx (LIQ,t1 K,-1) 0.125 0.022 -0.104 0.001(0.116) (0.186) (0.568) (0.244)GLCx (SALES,_1K,_t) -0.034 -0.012 0.237 -0.011(0.032) (0.074) (0.467) (0.298)GLCx qt-1 -0.082 0.129 -1.083* -0.121(0.096) (0.758) (0.405) (0.309)Number f 421 51 61 135observationsDegreesof 304 30 37 92freedomR2 within) 0.1833 0.3513 0.4263 0.3948R2(between) 0.0196 0.0002 0.0020 0.0287R2 overall) 0.0312 0.1002 0.0237 0.0801

Notes: Firmandyeardummiesare included.Standard rrorsarepresentedn parentheses. nasterisk *) indicates ignificance t the5 percentevel (two-tailed est).

sample are no more or less liquidity-constrainedn their investment decisionsthan their privatesector counterparts.Our results are therefore consistent withthe government'sclaim that GLCs do not enjoy cheap funding because of theirlink to the government.The fact that we fail to find significantcoefficients on the two interactionterms of interestmay be due to the disparityin sample sizes (17 GLCs versus92 non-GLCs)or,morespecifically,to therelativelysmall numberof GLCsin oursample.Unfortunately,hese 109 firmsrepresent he limit of the dataprovided nthe (comprehensive)CorporateHandbook.Breaking up or otherwisemanipulat-ing the samplesdoes not changeour results. To illustrate,columns2, 3, and4 inTable 3 presentthe results of the same regressionrun separatelyby sector andexcludingthe smallest non-GLCswith averagefjxed assets below S$50,000. The522



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estimated coefficients on GLC x (CASH, / Kt-1) and GLC x (LIQ-1 / Kt-1) are notsignificantlydifferent rom zero in each case.Our findings are, of course, based only on the sample period 1994-98.However,while relatively hort, his period s actuallyan importantne as itincludes the yearsjust after the onset of the Asian crisis. One can conjecturethatif GLCs areeligible for special treatment, hey will be more likely to need suchfavors when times are bad (e.g., during the Asian crisis) than when times aregood. The fact that we find no difference in liquidityconstraintsbetween GLCsand non-GLCsduringthis periodis thus a strong rejectionof the hypothesis thatGLCs have easier access to credit.18A second,more important,caveat is thatourfindingsobviously relateonly to GLCs that have been partiallyprivatizedand arepubliclylisted;unlisted GLCs or wholly ownedgovernmentcompaniesmaywellbehave differently.

IV.Does the MarketValueGLCsand Non-GLCsDifferently?If GLCsdo not seemto bebenefitingrom pecial inancial rivileges, oesbeingpartof Singaporenc.makeanydifference t all?Having oundno evidenceofpreferentialreditaccess for GLCs,we turnourattentionn this section to adifferentquestion, namely,how does the marketperceive GLCs comparedwithnon-GLCs?

As mentionedearlier,some GLCsclaimthattheironly advantage s thatbeinglinkedto thegovernment ends a positive signalto themarkets muchlike bearinga "Good Housekeeping stamp of approval").In this section, we investigatewhether he market'svaluationof a firm is correlatedwith its government ink. Wehave no priorbeliefs aboutwhether the government ink would translate nto ahigher q, lower q, or no effect on q. If GLCs differ from non-GLCsbecause thegovernment link enhances performance,for example, then one would expectGLCs to be valued more thancomparablenon-GLCs.On the other hand, if thecapital marketsperceive GLC managersto be corruptand inefficient, then onewould expect the government ink to translate nto a lowerq.Following the approachof Lang and Stulz (1994), we focus on Tobin's qratherthan on stock market or accountingmeasures of performance n order toavoid some of the problemsassociated with those comparisons.The numeratorof q-the firm's marketvalue-reflects the firm'sexpected futureprofits,whilethe accountingrate of returnmeasuresonly past profits.Furthermore,he firm'smarketvalue also incorporates he variance of expected profits, so q includes anautomaticadjustment or risk;by contrast,comparisonsof stock returnshave toaccount for differences in risk. Of course,the underlyingassumptionsbehind theuse of Tobin'sq are that financial marketsare efficient and thata firm's marketvalue is an unbiasedestimate of the presentvalue of its cash flows.18Apossibleextensionwould involvelengtheninghe time frameof the analysisso as to compare

resultsduring hepre-Asian risisperiodwith thepost-Asian risisperiod.The drawback ere s that hegainin lengthof the dataset would be offsetby a loss in breadth, s severalcompanies including omeGLCs)do nothave a very ong historyof beinglisted on the stockexchange.

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Table 4. Regression Results: Tobin's qDependent ariable:nq, (1) (2) (3) (4) (5) (6) (7)GLC 0.085 0.226* 0.224* 0.215" 0.217*" 0.199" 0.238*

(0.103) (0.090) (0.089) (0.110) (0.110) (0.095) (0.101)(Earnings Price) 0.873* 0.868* 0.832* 0.524* 0.535*(0.090) (0.089) (0.089) (0.218) (0.218)In(TotalAssets) 0.006 0.006 -0.015 -0.021(0.030) (0.030) (0.025) (0.027)(Debt Equity) -0.013 -0.002 -0.000(0.017) (0.014) (0.015)ROA 0.014* 0.014*(0.004) (0.005)Beta 0.045(0.060)Industry ummies No Yes Yes Yes Yes Yes YesYeardummies Yes Yes Yes Yes Yes Yes YesNumber f observations 530 530 530 530 530 529 464AdjustedR2 0.1659 0.2789 0.3815 0.3804 0.3811 0.4529 0.4550

Notes:Robust tandard rrors representedn parentheses. n asterisk*) indicates ignificanceat the 5 percentevel;a doubleasterisk **) indicates ignificance t the 10percentevel (two-tailedtest).See text forexplanation f columnnumbers.Industrydummies: 1) machinery ndequipment,2) electronicproducts, 3) metalproducts,(4) rubber ndplastic, 5) food andbeverage, 6) chemicalproducts,7) electrical, 8) printing ndpublishing,9) transport quipment,10) petroleum roducts,11) othermanufacturing,12) trans-port, 13) storage, 14) postand telecommunication.

Table4 reportssemilog OLSregressionsof q on the GLCdummyand severalcontrol variables.Theorydoes not dictate a specific functionalform for a q equa-tion, althoughHirsch and Seaks (1993) provideevidence that the semilog form issuperior.The semilog specificationalso has theadvantageof dampening he influ-ence of extremeor mismeasuredvalues of q.'9The first column of Table4 shows that,controllingonly foryeareffects, In(q)for GLCs is higherthan that for non-GLCsby 0.085 on average.This is more orless in line with our earlierobservation,basedon a comparison f means nTable2.However, he difference is not statisticallysignificant.Column 2 refines the analysis by including 14 industrydummies into theregression thebasecategorybeing "multi-industry").We find that ndustry ffectsincrease the magnitudeof the GLCpremium rom 8.5 percentto about 22.5 per-cent, and the coefficient on the GLC dummyis now significantat the 5 percentlevel. This suggests that GLCs tend to be in low q industriesbut tend to havehigh'9Wealso estimatedheregressions singa between-effl'ectsodel regression n groupmeanswith-out theyeardummies), nd found he resultsqualitatively nchanged.

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q's relative to their industrycohort.20How do we explain this difference in themarketvaluationof GLCscompared o non-GLCs?One possible explanation s that GLCs are morelikely to operate n protectedmarketsandhave a certaindegreeof monopoly power.If GLC stocks weresellingfor higher prices on the Singapore Exchange because these companies wereexploiting monopoly power,we wouldexpectGLCs to have a high earnings-priceratio-earnings in the presentwould be high, but marketvalue (price)would notrise in proportionbecause investorswould look forward o the long-runerosionofmonopoly powerin the face of new entry-and that nclusion of the earnings-priceratio would reduce the GLC coefficient.However,this does not appear o be thecase: the thirdcolumn shows that the GLC coefficientis not affectedby the inclu-sion in the regressionof the companies' earnings-price atios.Could the GLCpremiumbe reflectinga size effect and economies of scale?As notedearlier,GLCs tendto be big companies:the averageGLC in oursampleis about 10 times larger hanthe averagenon-GLC, n terms of total assets.Largerfirmsmay be better able to exploit scale and scope economies. If this is the case,largerfirms would have a cost advantageover smallerones andmaythereforebemore profitable.Column4 considers the effect of size (measuredby the log oftotal assets) on q.21If the GLCpremium s due to theirlargersize, the inclusionof this variableshouldeliminate(orat least substantially educe)theimpactof theGLCdummy.22We find thatthe GLC dummydoes decreaseby about 4 percent(from0.224 to 0.215), but remainsstatisticallysignificant.A thirdpossibilityis thatGLCsmay have lower debt-equityratiosthannon-GLCs. If GLCs are less leveraged hantheirprivatesectorcounterparts,heirprob-abilityof insolvency andfailure would also tendto be lower,and this may explaintheirhigherq. Column5 adds thedebt-equityratioto the list of regressors n orderto control for the risk of bankruptcy.The resultsindicate this variablecarries ittleexplanatorypower. More important, he coefficient on the GLC dummy is notmateriallyaffectedby its inclusion-it remains argeandstatisticallysignificant.OrperhapsGLCs are moreprofitable hannon-GLCs.This could be the caseif they are betterrun or if they receive special discounts on inputs,for example.Column 6 shows the effect of adding the ROA to the regression.The estimatedGLC coefficient declines in size by about 8 percent(from 0.217 to 0.199), butremainsstatisticallysignificant.This suggests thatpartof SingaporeInc.'s addedvalue comes frommakingthe GLCsmoreprofitable.However,the fact that more

20ThatGLCsseem to be in lowq industries ctuallymaynot be too surprising, iventhefact that heywere establishedmostly n areaswhere heprivate ectorwas-at leastinitially-unwilling to go. Inoursample,GLCsaremostlyfound n industries uch as transport,torage,petroleum roducts, ndtransportequipmentmanufacturing,ndgenerally reabsent rommanufacturingndustriesnvolving lectricalandelectronicproducts,machinery ndequipment,metalproducts, hemicalproducts, tc.21Weuse the ogof assetsas ourmeasure f sizeinorder ocontrol orpossiblenonlinearitiesforexam-ple,the effect of size on q maydiminish s sizeincreases).220nemayalsoposit,a priori,a negative orrelation etweensize andq.Young, ypically mall,andpromisingirms end o haveanexpectedhighfuture rowthprofile, o q maytend o behigher orsmallerfirms. nanycase,the mportant oint s that he GLCdummy emains elatively argeandsignificant fteraccountingor size.

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CarlosD.Ramirezand LingHuiTanthan90 percentof thepremiumsurvivesthe inclusion of this variablesuggeststhatinvestors are also valuing the capitalizedworth of futurehigher earningsfrombeing affiliatedwith the government.Finally,we considerthepossibilitythat GLCs' stock returnsmayhave a lowercovariancewith the marketreturn.If this is the case, it would imply thatmarketmovements have little influence on GLCs' returns,therebymaking them moreattractiveas investments n a portfoliothat minimizes risk exposure.Column 7shows the effect of addingeach firm's beta to theregression.Beta is the covariancebetweenthe firm's returnand the marketreturn,dividedby the marketvariance,that s, it is the"normalized" ovarianceof returns.23f investors'appetites or GLCstocksare drivenby thisconsideration, he inclusion of beta shouldreduce the sizeof the GLCpremium.Theregressionsresults ndicate,however, hat this is not thecase; instead,the inclusion of betaincreasesthepremium o 24 percent.In summary,comparingthe Tobin'sq of GLCs and non-GLCs,we find evi-dence thatthe capitalmarketsvalue GLCs morehighly than non-GLCs.Thispos-itive and significantrelation between the government ink and q is robust to theinclusionof othervariables-such as industryeffects, size and monopolypower,profitability,and bankruptcyrisk-that might affect firm value and thereby q.Takingthese variables nto considerationstill leaves us with a GLC premiumofmore than20 percent.Thus, performancemeasuresaside, the capitalmarketsseem to rewardsub-stantiallythe very fact that a companyis linked to the government.This positivemarketperceptionis hard to pin down. It could simply reflect a form of brandrecognition(muchlike how consumersarewilling to pay morefor goods bearinga well-knownlabel than for similaror even identicalgoods without such a label).Orinvestorsmay believe-rightly or wrongly-that GLCsare backedby the gov-ernment,whichwill not let themfail in times of trouble.(Krause,1987, notesthata few small GLCswerepermitted o fail in the 1970s and a few others were closeddown in the 1980s, but the total capitalizationof these failures was relativelysmall.)

V. ConclusionSingapore'sGLCsarean unusualbreed of stateenterprises.Primarily stablishedto catalyze the industrialization rocess,they have expanded nto all areasof theeconomy, including those servedby private enterprises.The governmentclaimsthatGLCs are run on commercialrather hanideological grounds,with no stateinterferenceor favors:Theyareexpectedto be efficient andprofitable; heyare notsupposed to receive special privileges or concealed subsidies;they are free to

23Beta s obtained rom the CorporateHandbook,where it is computedusing the natural og ofweeklyreturns f the stockagainst heweeklyreturns f theAll-SingaporeEquities ndexas the marketindexfor the 105-weekperiod romAugust29, 1997,toAugust27, 1999.Thebetaof the markets 1.Thereturns f stockswithbeta coefficientsgreater han1 would,on average, espond o a larger xtentthanthe marketportfolio o factors hataffectthatcapitalmarket s a whole.Conversely,hose with beta co-efficients ess than I wouldrespond o a lesserextent.

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recruit staff in the open market,both at home and abroad,on competitiveterms;andthey shouldbe allowedto fail if they lose money.Yet time andagain, chargesof favoritism or GLCs at theexpense of privateenterprisessurface.Do GLCs receive specialfinancingprivilegesor not? This paper indsno basisfor the argument hat GLCs have easier access to credit. Ourregression resultsindicate that GLCs are no more or less liquidity-constrainedn their investmentdecisions than theirprivatesectorcounterparts.This suggests thatGLCs arecom-petingon a level playing field as far as access to financingis concerned.However,we do find thatbeing a GLCis rewardedn financialmarketswitha premiumof more than 20 percent.This is afteraccounting or the fact thatGLCstend to be large(so thatthey may be able to exercise monopoly poweror exploiteconomies of scale and scope), profitable,and less likely to go bankrupt.ThisGLCpremiumhas to reflect the market'sperceptionof thebenefits-whether realor illusory-of being linked to the government.

While our results areinteresting, heydo not implythatthegovernment houldkeepcreatingnew GLCs orexpandingexistingones. If theGLCpremiums largelydue to the market'sperceptionof the benefits of being linked to the government,furtherproliferationof GLCs-which will tend to stretch the resourcesof thegovernment-will only dilutetheseperceivedbenefitsand,thereby, he premium.REFERENCES

Bardhan,Pranab, ndJohnE. Roemer,1992,"Market ocialism:A Casefor Rejuvenation,"Journal of Economic Perspectives (U.S.), Vol. 6 (Summer), pp. 101-16.Corporate Handbook Singapore 2000 (Singapore: CEIC Holdings Ltd.).

Fazzari,Steven, R. Glenn Hubbard,and B. Petersen, 1988, "FinancingConstraintsandCorporateInvestment,"Brookings Papers on Economic Activity: 1 (Washington: BrookingsInstitution), p. 141-95.,2000, "Investment-Cash low SensitivitiesAre Useful:A Commenton KaplanandZingales," QuarterlyJournal of Economics, Vol. 115 (May), pp. 695-705.

Harrison,Ann E., and MargaretMcMillan,2001, "Does DirectForeignInvestmentAffectDomestic Firms' Credit Constraints?"NBER WorkingPaperNo. 8438 (Cambridge,Massachusetts: ationalBureauof EconomicResearch).Hennessy,Christopher ., andAmnonLevy,2002,"AUnifiedModelof Distorted nvestment:Theoryand Evidence"unpublished; erkeley:University f California tBerkeley,HaasSchoolof Business).Hirsch,BarryT.,andTerryG. Seaks, 1993,"Functional orm nRegressionModelsof Tobin'sq," Review of Economics and Statistics (U.S.), Vol. 75 (May), pp. 381-85.Hoshi,Takeo,AnilKashyap, ndDavidScharfstein, 991,"Corporatetructure, iquidity, ndInvestment: vidence romJapanesendustrialGroups,"Quarterly ournalof Economics,Vol. 106(February), p.33-60.Hubbard, .Glenn,1998,"Capital-MarketmperfectionsndInvestment,"ournalofEconomicLiteratureU.S.),Vol.36 (March), p. 193-225.Kaplan,StevenN., andLuigi Zingales,1997,"DoInvestment-Cash lowSensitivitiesProvideUseful Measuresof FinancingConstraints?" uarterly ournalof Economics,Vol. 112(February), p. 169-215.

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Krause,LawrenceB., 1987, "TheGovernment s an Entrepreneur,"n TheSingaporeEconomyReconsidered, d. by Koh Ai Tee, Krause,and Lee (Tsao)Yuan Singapore: nstituteofSoutheastAsian Studies).Lang,LarryH. P., and Rene M. Stulz, 1994, "Tobin'sq, CorporateDiversification, nd FirmPerformance,"ournalof PoliticalEconomyVol. 102 (December), p. 1248-80.Lee, ShengYi, 1976, "PublicEnterprise nd EconomicDevelopment n Singapore,"MalayanEconomicReview,Vol. 21 (October), p. 49-73.Low, Linda,1991, ThePoliticalEconomy fPrivatisationn Singapore: nalysis, nterpretation,and Evaluation Singapore ndNew York:McGraw-Hill).Ramirez,Carlos D., 1995, "Did J. P. Morgan'sMen Add Liquidity?Corporate nvestment,CashFlow, andFinancialStructure t the Turnof the Century,"ournalofFinance,Vol. 50(June),pp. ~61-78.Shleifer,Andrei, 1998, "StateversusPrivateOwnership,"ournalof EconomicPerspectives,Vol. 12 (Autumn), p. 133-50.Singapore,Department f Statistics, 001, "Contributionf Government-Linkedompanies oGrossDomesticProduct,"OccasionalPaperon EconomicStatistics March).Singapore,EconomicReviewCommittee, 002, Recommendationsn Goverrtmerttn Business(May 30). Avai able via the Internet: ttp:~www. i.gov. g/public/PDF/CMT/EREISCMa nRepOt.pdfsid=I 13&cid=l 120.Singapore, Ministry of Information,2002, "Motion on Temasek Charter and EISC'sRecommendations n Government n Business--SpeakingPoints for DPM's Round-upSpeech,"SingaporeGovernmentPress Release, August 28. Availablevia the Internet:http ivww.mti. ov. g/public/fmzcmngrintpage.sp?SID=l 0&CID=l243&DID=&Page=.Singapore,Ministryof Tradeand Industry, 003, "New Challenges,FreshGoals--TowardsDynamicGlobalCity,"Reportof the EconomicReviewCommittee, ebruary . Availablevia the Internet: h tp:~www.mti. 0vog/public/PDF/CMT/ER Comm Cove v2.pdf?s d=150&c d=1480.UnitedStates,StateDepartment, mbassySingapore, 001, "Government-LinkedorporationsFace the Future,"Economic Report, March. Available via the Internet:http~www.usembassysingapoe. rg. g/epn001/GLC2000.tml.

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