2022). By doing so, we can study how state ownership and its different shapes and forms can potentially influence firm decisions even without having full control and measure how this can affect firm performance.

The WB BOS database provides information on entities with state participation across more than 90 countries. It collects firm-level data including characteristics such as age, sector of operation, and size, as well as financial indicators of revenues and profits. It also provides detailed ownership information to differentiate between directly and indirectly owned companies, the level of state participation, and the degree of proximity with the state (i.e., layers of the ownership tree). Following Abramov, Radygin, & Chernova (2017), we differentiate between firms directly owned by the state vis-à-vis those in which the state owns shares through other organizations or chains of firms (i.e., indirectly owned). For the latter, the BOS database informs how many firms or layers connect a firm with the state.<sup>5</sup> Finally, the WB BOS database provides information on the level of state participation to differentiate by minority shareholding (10-24.9%), blocking minority (2549.9%), majority shareholding (50-99.9%), and full state participation (Dall'Olio, et al., 2022).<sup>6</sup>

# 3.2 ORBIS financial module - Bureau van Dijk (BvD)

The second source of information is the raw financial module of ORBIS compiled by the Bureau van Dijk Electronic Publishing (BvD). The raw data was processed and cleaned implementing the protocol in the literature following Kalemli-Ozcan et al. (2015) and Cusolito (2020). This dataset provides a rich set of financial indicators for both privately and government owned entities. However, it does not have an indicator to differentiate whether a firm is a BOSs or a private firm.<sup>7</sup> To identify which firms in the ORBIS financial module can be defined as Businesses of the State (BOS), we merge the WB BOS database with the ORBIS financial module. BOSs are defined as firms with 10% or more state direct or indirect participation, whereas POEs are defined as those with no state participation or state shareholding below 10%.

This paper focuses on European countries in which there is consensus in the literature on having a higher coverage in the ORBIS financial data despite the caveats of completeness of information (Kalemli-Ozcan et al., 2015), (Bajgar et al., 2020), (Cusolito, et al., 2022). We cover a subset of 16 European countries over the period 2011-2020 for which we have simultaneously i) ORBIS firm-level data, ii) the WB BOS database for the specific country, and iii) representativeness of at least 60% of the national employment in the financial module in ORBIS.<sup>8</sup> We compare the performance of BOSs and POEs through a multivariate approach following Kabaciński, Kubiak, & Szarzec (2020) and Chan, Chen, & Wong (2018) analyzing operational performance measured by labor productivity and three aspects of financial performance: profitability, financial liquidity, and return on investments. We measure labor productivity as operating revenues per worker. Financial performance is assessed through financial liquidity using

> 5 For instance, C is considered as a BOS through 3 layers of ownership in the case where the Ministry of Finance owns (by 10% or more) a company A, which owns company B (by 10% or more), which also owns company C.

> 6 The WB BOS database does not provide information on golden shares or veto powers, so the level of participation and thresholds proposed are used as a proxy of control and influence of the state over the firms.

> 7  The ORBIS dataset does not provide a variable to directly identify those with state participation  Although a proxy variable in ORBIS denoted as the Global Ultimate Owner can serve to identify some companies with state shareholding, it provides an underestimation of the real footprint of the state in the markets and suffer from omission errors that could misclassify SOEs as private firms (Dall'Olio, et al., 2022).

> 8 Yet, there is also variation of coverage within these countries as documented by (Bajgar, Berlingieri, Calligaris, Criscuolo, & Timmis, 2020).

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