<u>Clustered errors</u> Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 Firm <u>Sector 2d</u> <u>No</u> <u>No</u> <u>No</u> <u>No</u> <u>No</u> <u>No</u> <u>No</u> Note: Current ratio is estimated as current assets over current liabilities (due within a year). The reference (excluded category) refers to Privatelyowned Enterprises (POEs), so results should be interpreted as compared to private firms within the same sector, size, and age, and sector and controlling by the respective fixed effects. Firm’s size is measured as the lagged values of log workers in year t-1, age refers to 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 (sector-year FE), country specific shocks (country-FE), country time varying events (country-year FE), and country and sector specific and time varying shocks (country-sector-year, FE). Clustered standard errors are used to control for potential autocorrelation within firms (column 8 to capture potential serial correlation) and sectors (column 9).

Furthermore, we examine the ability of firms to cover their total financial obligations and the overall balance between debt and equity using the solvency ratio. The solvency ratio is provided by the ORBIS financial module and is computed as the ratio between shareholder’s funds and the total assets. Results in Table 9 suggest BOSs have a higher solvency ratio compared to private counterparts. On average, BOS’ solvency ratio is 5.4 percentage points higher than POEs. In other words, BOSs rely relatively more on debt than on shareholders’ funds for their operation or are relatively more leveraged than private peers as evidenced before. Following Phi et al. (2019), this result could be interpreted as a potential signal of soft budget constraints in the sense that BOSs may be more dependent on debt to cover their financial needs and that it can result from indirect or direct state support, debt guarantees, or access to finance at a lower cost. Despite being exposed to higher levels of debt and lower profitability, soft budget constraints can make firms with state participation less likely to face bankruptcy (Megginson & Netter, 2001).<sup>19</sup> _Table 9. Solvency ratio_

||||**_Solvenc_**|**_y ratio_**||||||
|---|---|---|---|---|---|---|---|---|---|
||(1)|(2)|(3)|(4)|(5)|(6)|(7)|(8)|(9)|
|BOS|7.045***|5.606***|5.542***|5.582***|5.624***|5.455***|5.481***|5.481***|5.481***|
||(0.092)|(0.095)|(0.095)|(0.095)|(0.095)|(0.097)|(0.098)|(0.224)|(0.359)|
|Size|-0.602***|-2.004***|-2.030***|-2.059***|-2.027***|-1.926***|-1.922***|-1.922***|-1.922***|
||(0.015)|(0.015)|(0.015)|(0.015)|(0.015)|(0.015)|(0.015)|(0.032)|(0.088)|
|Age||0.780***|0.779***|0.781***|0.778***|0.741***|0.741***|0.741***|0.741***|
|||(0.001)|(0.001)|(0.001)|(0.001)|(0.001)|(0.001)|(0.003)|(0.009)|
|Listing status|||5.675***|5.567***|5.501***|6.367***|6.295***|6.295***|6.295***|
||||(0.240)|(0.241)|(0.241)|(0.250)|(0.252)|(0.614)|(0.335)|
|Constant|42.67***|36.87***|36.95***|37.02***|36.95***|37.11***|37.09***|37.09***|37.09***|
||(0.0514)|(0.0528)|(0.0529)|(0.0530)|(0.0530)|(0.0536)|(0.0538)|(0.108)|(0.295)|
|Observations|6,565,319|6,418,327|6,418,327|6,418,327|6,418,312|6,418,241|6,411,529|6,411,529|6,411,529|
|R-squared|0.07|0.106|0.106|0.107|0.109|0.132|0.137|0.137|0.137|
|Country FE|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|
|Sector FE|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|
|Year FE|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|
|Country-year FE|No|No|No|Yes|Yes|Yes|Yes|Yes|Yes|
|Sector-Year FE|No|No|No|No|Yes|Yes|Yes|Yes|Yes|
|Country-Sector FE|No|No|No|No|No|Yes|Yes|Yes|Yes|
|Country-Sector-Year FE|No|No|No|No|No|No|Yes|Yes|Yes|
|Clustered errors|No|No|No|No|No|No|No|Firm|Sector 2d|

Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 19 This can impact the firm dynamism, creation of jobs, entry and exit of firms, which are beyond the scope of this paper, but that can have important implications for private sector development.

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