that the discharge of their essential services poses, particularly for public finances. It is widely recognized that SOEs are indispensable for the provision of certain public goods to the population, particularly in cases where no private operator would provide such services (e.g., natural monopolies) or could not at a price that is palatable for the population. At the same time, SOEs often fall victim to poor governance, lackluster control mechanisms and operational inefficiencies that ultimately imply high costs to the sovereign as owner in the form of subsidies, provision of liquidity, and coverage of operating losses via support payments and recapitalizations.

In addition, SOEs often accumulate a high debt load, including from the private sector, that is to be considered a contingent liability for government (for a detailed summary of SOE issues, see IMF, 2020b). Since many SOEs are not included in the central government accounts and may only appear in the general government sphere, their losses and possibly unsustainable debt may go unnoticed by the public for years until an ailing institution requires more immediate support that then prompts outright transfers from the central budget or, if government guarantees given to private creditors are invoked, payments to third parties.

Perhaps owed to the perceived inevitability of inefficient operations and corresponding losses, the financial performance of SOEs is generally taken for granted or not much examined at all, although there are some notable exceptions, particularly in Asia (see Park, 2017) and a few African countries.1 Likely for this presumed lack of influence on financial results, research has tended to focus of operational issues of SOEs and fiscal implications but much less so on the financials of SOEs.