# 4.2.1 Cleaning Rules: Standard cleaning and quality control

The ownership and financial modules in ORBIS went through various cleaning steps before we were able to identify SOEs and extract their financial and economic data. Building on the lessons and literature using ORBIS information (Kalemli-Ozcan, Sorensen, Villegas-Sanchez, Volosovych, & Yesiltas, 2015), the following cleaning steps were applied:

- _Remove the duplicates from the ownership Links data._ Using the subsidiary id, shareholder id, and type of relation to identify each unique observation, we retain the most recent ownership information if duplicates exist.

- _Reconstruct the Year variable._ The variable Year takes the value of year for the closing date if the closing date falls on or after June 1<sup>st</sup> . Otherwise, we assign the previous year to that variable. The Year variable indicates the fiscal year for which the financial data were reported.

- _Remove inactive links._ For each year, we remove all obsolete links that were no longer valid by using ORBIS’s variable “Active archived” that indicates whether a link is active or obsolete. This step is essential to ensure that the information on ownership is correctly specified every year.

- _Convert local nominal currency._ The balance sheets and income statement data are stored in local and nominal currency in the ORBIS files. For our purposes, we converted all nominal values to real US Dollars with 2005 as the base year.

The cleaned version of the Ownership module is the starting point for the creation of the global BOS database. After the ownership module is cleaned, the following cleaning rules were further applied:

- _Drop entities that are no longer active in the markets_ : Using the “Active” status variable in the ORBIS interface, we delete all firms flagged as inactive because they correspond to firms that were dissolved, liquidated or under bankruptcy.

- _Complement data gaps when information as of 2019 was not available:_ When there was no information available in terms of sector of operation, revenues, employment, or profits as of 2019, we employed data reported as of 2018 or 2017 as the best proxy. The financial information was deflated to report prices as of 2019 using the WBG GDP deflators. All financial indicators are reported in thousand USD.<sup>41</sup>

- _Review financial data referred to as unconsolidated information to avoid double counting (or overestimation of the state footprint):_ Although ORBIS provided a variable to indicate whether a company reports as a consolidated unit (as parent with their subsidiaries) or unconsolidated (as individual), we did several cross-checks to ensure firms with information were reporting in unconsolidated terms.<sup>42</sup>

- _Review ownership information:_ Cross-check with existing information to confirm the level of state participation as of 2019. When official sources or complementary information suggested firms do

> 41 When data was provided in local currency, the exchange rate as of December of 2019 by the Central Bank was employed to convert the information to USD.

> 42 When the company only reported consolidated information, it was used for the aggregate dashboard, but to avoid double counting issues, the information of the subsidiaries is not included. Those firms are flagged as n.a., to indicate their information is captured by the parent company in the database.

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