Leviathan Inc. and Corporate Environmental Engagement

In a 2010 special report, The Economist magazine termed the resurgence of state-owned, publicly listed enterprises “Leviathan Inc.” and criticized the poor governance and low efficiency of these firms. We compile a new comprehensive data set of state ownership of publicly listed firms in 44 countries over the period of 2004–2017 and show that state-owned enterprises are more responsive to environmental issues. The effect is more pronounced in economies lacking energy security and strong environmental regulation, and among firms with more local operations and higher domestic government ownership. We find a similar effect on corporate social engagement but not on governance quality. These results suggest a different role for “Leviathan Inc.,” especially in dealing with environmental externalities. This paper was accepted by Colin Mayer, Special Section of Management Science on Business and Climate Change. Funding: H. Liang acknowledges the DBS Sustainability Fellowship from Singapore Management University. P.-H. Hsu acknowledges the fellowship from the Batten Institute of Darden School of Business of the University of Virginia and the financial support from the E.SUN Academic Award and Ministry of Science and Technology and Ministry of Education in Taiwan Grants MOST108-2410-H-007-099-MY2, MOST109-2628-H-007-001-MY4, MOST109-2634-F-002-045, MOE109J0321Q2, and MOE109L900202. P. Matos acknowledges financial support from the Richard A. Mayo Center for Asset Management at the University of Virginia's Darden School of Business. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2021.4064 .