In this study, five individual aspects of SOE corporate governance are included in the model. First, CEO duality refers to separation of CEO and board chair positions. In Korea, the Act on the Management of Public Institutions requires that one of the outside nonexecutive directors become the board chair for all market-type PCs and larger semi market-type PCs with assets greater than or equal to two trillion won. For other SOE types, the CEO also performs as board chair. In this model, CEO duality is a dummy variable that is recorded as 1 if the firm has a nonexecutive director as board chair. Second, board size is measured as the total number of board of directors. The Act sets the maximum number of board members at 15 for PCs and QGIs. However, SOEs categorized as PCs or QGIs can decide the exact number of board members within the maximum. The number of board members for NPIs is not regulated in the Act and, hence, SOEs categorized as NPIs can decide the number of board members without any limits. For instance, the board of the Korea Water and Wastewater Works Association, an NPI, has a total of 65 directors. However, most research institutions categorized as NPIs do not have any board members.

Third, board independence is measured as the share of outside nonexecutive directors on the board. The Act requires that the share of nonexecutive directors of PCs, larger QGIs, and several specifically designated QGIs be equal to or greater than one-half. For the smaller QGIs, the share of nonexecutive directors should be equal to or greater than one-third. For NPIs, the Act does not impose any requirements regarding the composition of the board. Fourth, corporatization is measured as the percentage of self-generated revenue in the firm’s total revenue, which represents the level of commerciality of the firm. Fifth, disclosure practices are included as one of the aspects of corporate governance in the model. All SOEs in Korea are obliged to disclose detailed management information on the ALIO system and on their own websites. In this model, SOEs’ disclosure practices are measured by the penalty score of the MoSF’s annual disclosure inspection. To deliver credible information to the public, the MoSF annually inspects the accuracy, frequency, timeliness, and quality of the information disclosed and issues a penalty score to the SOE if there is any inaccuracy or inappropriateness. The greater the penalty score, the lower the quality of information disclosure. Firm size, firm age, publicly traded SOEs, and the type of SOE are used as control variables in the model to control for compounding effects (Table 4).

**Table 4. Variable Descriptions**

|**Variable**|**Description **|
|---|---|
|Performance evaluation|Performance evaluation grade (6=Outstanding, 5=<br>Very Good, 4= Good, 3=Satisfactory, 2=Poor,<br>1=Very poor)|
|Customer satisfaction|Customer satisfaction survey score|
|Debt ratio|Debt ratio|
|ROA|Return on assets|
|CEO duality|Separation of CEO and board chair? (1=Yes, 0=No)|
|Board size|Number of directors on the board|
|Board independence|Ratio Share of non-executive directors on the board<br>Ratio Share of revenue from non-governmental|
|Corporatization|sources|
|Disclosure|Disclosure inspection score|

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