(columns 6) vis-à-vis directly owned BOSs. Interestingly in terms of liquidity, we find further separation from the state seems to reduce the financial leverage of BOSs and reduce the gap vis-à-vis POEs. This could be explained by the fact that as firms depart from the public authority, the probability of receiving direct government support could diminish, and therefore their decisions on financial leverage are more aligned with those of POEs. These findings could be indicative than higher separation or autonomy from the firm could serve to aligned better the incentives from the firm to achieve improved performance outcomes, which can curb political interference of the government in the day-to-day decisions of the firm and mitigate principal-agent issues.

_Table 14. Estimations by degree of proximity of state participation_

|VARIABLES|(1)<br>**Labor productivity**<br>**(log)**|(2)<br>**Profit margin**|(3)<br>**Current ratio**|(4)<br>**Solvency**<br>**ratio**|(5)<br>**ROA**|(6)<br>**ROE**|
|---|---|---|---|---|---|---|
|Indirect - 2 layers|0.247***|1.501***|-0.300***|-6.793***|0.709***|4.934***|
||(0.0117)|(0.189)|(0.0677)|(0.303)|(0.181)|(0.758)|
|Indirect - 3 layers|0.414***|2.270***|-0.928***|-8.877***|1.247***|7.376***|
||(0.0211)|(0.330)|(0.107)|(0.451)|(0.228)|(0.868)|
|Indirect - 4+ layers|0.487***|4.211***|-0.683***|-10.70***|2.064***|9.513***|
||(0.0241)|(0.297)|(0.135)|(0.527)|(0.236)|(1.040)|
|Size|0.342***|0.322***|-0.472***|-0.854***|0.125***|-0.419**|
||(0.00568)|(0.101)|(0.0201)|(0.117)|(0.0472)|(0.168)|
|Age|-0.0101***|0.0894***|0.0101***|0.416***|0.0265***|-0.118***|
||(0.000711)|(0.0117)|(0.00344)|(0.0171)|(0.00645)|(0.0244)|
|Listing status|-0.311***|1.849***|-0.111|1.670**|-0.184|0.135|
||(0.0261)|(0.521)|(0.0932)|(0.693)|(0.253)|(1.380)|
|Constant|5.026***|-3.509***|5.066***|48.35***|-0.665***|3.789***|
||(0.0818)|(0.538)|(0.112)|(0.508)|(0.250)|(0.811)|
|Observations|179,124|169,457|176,038|175,205|177,164|159,442|
|R-squared|0.700|0.230|0.133|0.195|0.106|0.086|
|Country FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Sector FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Year FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Country-year FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Sector-Year FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Country-Sector FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Country-Sector-Year FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Clustered errors|Yes|Yes|Yes|Yes|Yes|Yes|

Robust standard errors in parentheses

*** p<0.01, ** p<0.05, * p<0.1

Note: This regression is performed only among BOSs as we do not have the ownership structure of the POEs in the data. Thus, the reference (excluded category) refers to directly owned (BOSs), so results should be interpreted as compared to a firm directly owned by the state (10% or more) in the same sector, size, and age, and controlling by the respective fixed effects. Labor productivity is measured as the total revenues per worker in logarithm. Profit margin is the ratio between profits before tax over total revenues*100 (%). Current ratio is estimated as current assets over current liabilities (due within a year). Solvency ratio is measured as the shareholders’ funds over total assets. Return on Equity (ROE) is computed as the ratio between net income and shareholders’ fund *100 (%). Return on Assets is computed as the ratio between net income and total assets *100 (%). This variable is provided directly in the financial statements from ORBIS (BvD). Estimates include only firms with state participation -BOS only. Size is measured as the log of total workers in year t-1 for the outcomes in columns (2-6), whereas size is measures as log of total assets when estimating labor productivity (column 1) since the outcome is normalized by employment. Age is the lagged number of years in the market in t-1. Listed status is a dichotomous variable that takes value 1 if the company is listed in the stock market, 0 otherwise. Fixed effects are included to absorb for potential shocks such as temporary shocks (year-FE), sectoral shocks (sector-FE), time-varying sectoral shocks (sector21