Infrastructure is critical to economic development. When infrastructure companies are owned and operated by the government, however, they create significant sources of fiscal risk. These fiscal risks can be sizable, but they are often preventable with proper planning, risk assessment, and strict rules and procedures for corporate and fiscal governance. This paper examines fiscal risk stemming from state-owned enterprises (SOEs) in the infrastructure sector in a sample of 135 firms in 19 countries from an original database of SOE financials for 2009–18. The paper develops a typology of fiscal risks and their determinants, builds new measures of fiscal injections to SOEs, and documents them using the novel database. The results show that governments support SOEs through a remarkably wide range of fiscal instruments. The fiscal cost of supporting infrastructure SOEs is usually below 1 percent of gross domestic product. Support is more prevalent and frequent than previously thought. The findings show that fiscal risk stems not only from “tail risk,” but also from the everyday operation of infrastructure SOEs. The paper calculates the Altman Z” score (a measure of default risk) and shows that it can be used to forecast the need for fiscal injections in SOEs.
Detalhes
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Autor
Herrera Dappe,Matias, Musacchio,Aldo, Pan,Carolina, Semikolenova,Yadviga Viktorivna, Turkgulu,Burak, Barboza,Jonathan
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Data do documento
2022/03/15
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TIpo de documento
Documento de trabalho sobre pesquisa de políticas
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No. do relatório
WPS9970
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Nº do volume
1
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Total Volume(s)
1
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País
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Região
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Data de divulgação
2022/03/15
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Disclosure Status
Disclosed
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Nome do documento
Smoke and Mirrors : Infrastructure State-Owned Enterprises and Fiscal Risks
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Palavras-chave
fiscal; fiscal risk; fiscal transfer; state-owned enterprise; book value of equity; civil service pension system; state-owned banks; market value of equity; distribution of infrastructure; contingent liabilities; contingent liability; fiscal cost; government loan; government equity; cash flow risk; deferred tax; operation of infrastructure; support infrastructure; maintenance of road; gross fiscal cost; credit rating agencies; access to equity; credit rating agency; share of equity; variability in weather; global financial crisis; prices of input; commodity price fluctuation; remote rural area; public policy objective; state insurance scheme; costs of investment; project cash flow; form of credit; government tax revenue; transfer of asset; government budget management; share of asset; combination of equity; labor market policy; asset and liability; cash flow statement; cash flow increase; deterioration of infrastructure; asian financial crisis; price of oil; earnings before interest; net present value; millennium challenge; cash flow shortfalls; risk of default; country fixed effect; airport road; retained earnings; financial ratio; Ownership Share Type; bailout risk
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