associations are found for the other performance measurements including customer satisfaction and ROA. The results also show that better disclosure practices are significant in predicting the performance evaluation grades and ROA.

The effects of corporatization on SOE performance are mixed. Corporatization is negatively associated with performance evaluation grades but positively associated with the level of customer satisfaction and debt reduction. This could be explained by the fact that performance evaluations assess both financial and nonfinancial achievements. SOEs that have a greater share of selfgenerated revenue tend to pursue more financial performance, as they receive less government support for their daily operations. Considering that there could be some trade-offs between financial and nonfinancial performance, it could be challenging to obtain good performance evaluation results if SOEs are focusing heavily on financial performance. These results imply that corporatized SOEs or SOEs with a higher share of self-generated revenue would be more likely to pursue financial performance by enhancing customer satisfaction or maintaining good financial sustainability. However, this is not likely to lead to a better balance between financial and nonfinancial performance. As a result, hypothesis H4 (corporatization) is not accepted for all performance variables but still holds for financial performance.

The model provides interesting results regarding two variables on nonexecutive board members: CEO duality and board independence. CEO duality was expected to increase SOE performance because it could reduce agency issues by allowing effective oversight from an independent board chairman. Contrary to the expectation, however, the empirical model suggests that there is a negative association between CEO duality and ROA. Similarly, board independence, as measured by the share of nonexecutive directors in the board, is negatively associated with the level of customer satisfaction. This result implies that the expected roles for nonexecutive directors in the board may not be fully achieved in reality. Several studies on SOE boards of directors point out that, in many cases, boards are composed of various politically connected directors and may suffer from corruption and lack of expertise (Menozzi, Gutiérrez Urtiaga, and Vannoni 2011; Fan, Wong, and Zhang 2007). In that case, the independent board directors in the board could have negative impacts on the performance of SOEs. Thus, the empirical results do not confirm hypotheses H1 (CEO duality) and H3 (board independence). These unexpected results of the empirical model suggest the need for further investigation to explain the relationship between board independence and performance.

# **6. Conclusion**

Corporate governance reforms are increasingly considered as important vehicles in improving the efficiency of SOEs. Although there is plenty of evidence on the effects of corporate governance on private sector firm performance, empirical studies on the role of corporate governance in SOE performance is scant due to data limitations. The biggest contribution of this study is to understand the relationship between corporate governance and performance and the specific aspects of corporate governance using detailed SOE data in Korea. Corporate governance has been the key instrument in SOE policy in Korea since the government centralized the ownership function in 2007.

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