Totally Publicly-Owned (TPO) Utilities and Financial Performance: What is the role of some aspects of governance?

Author/s Fabio De Matteis, Alessandra Tafuro, Fabrizio Striani, Daniela Preite
Publishing Year 2024 Issue 2023/3 Language English
Pages 23 P. 89-111 File size 323 KB
DOI 10.3280/MACO2023-003005
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

Public services impact on the citizens’ lives, especially in the case they are deliv-ered by totally publicly-owned (TPO) utilities, that are funded by public money. This highlights the relevance of performance management in totally publicly-owned utilities from which derives the research aim that is to investigate elements that can influence their financial performance, with a specific attention on gov-ernance. We focus on a sample of all the utilities (116) wholly owned by the Ital-ian capitals of the provinces for the years 2008-2017 (n. 1,350 observations). Ap-plying the Generalized Least Square (GLS) method, the analysis results allow us to conclude that: the female presence and political orientation of the Board of Direc-tor do not impact on the totally publicly-owned utilities’ performance, while size variables differently impact. Political implications (potential disconnection be-tween ownership strategies and Board of Director choices; possibility of a joint management of public services by more municipalities expanding corporate governance) and managerial implications (recruitment strategy, management control system supporting corporate governance) are highlighted. The limit of the work is also identified in the conclusion.

Keywords: Totally publicly-owned utilities, Financial performance, Corporate governance, Public management

  1. Adams R.B., Ferreira D. (2009), Women in the boardroom and their impact on governance and performance, Journal of Financial Economics, 94, pp. 291-309.
  2. Annesi N., Battaglia M., & Frey M. (2021), Stakeholder engagement by an Italian water utility company: Insight from participant observation of dialogism, Utilities Policy, 72, 101270.
  3. Bel G., Fageda X. and Mur M. (2014), Does cooperation reduce service delivery costs? Evidence from residential solid waste services, Journal of Policy Analysis Research and Theory, 24(1), pp. 85-107.
  4. Bryman A. (2008), Social Research Methods, Paperback, Oxford.
  5. Buchanan J.M. and Tollison R.D. (1984), The Theory of Public Choice – II, The University of Michigan press, Michigan.
  6. Calabrò A., Torchia M., and Ranalli F. (2013), Ownership and control in local public utilities: the Italian case, Journal of Management & Governance, 17(4), pp. 835-862.
  7. Campbell K. and Minguez-Vera A. (2008), Gender diversity in the Boardroom and firm financial performance, Journal of Business Ethics, 83(3), pp. 435-451.
  8. Carter D.A., D’Souza F., Simkins B.J. and Simpson W.G. (2010), The Gender and Ethnic Diversity of US Boards and Board committees and Firm Financial Performance, Corporate governance, An international Review, 18(5), pp. 396-414.
  9. Cetrulo T.B., Ferreira D.F.C., Marques R.C., and Malheiros T.F. (2020), Water utility performance analysis in development countries: on an adequate model for universal access, Journal of Environmental Management, 268,
  10. Chen K.C.W., Wei K.C.J. and Chen Z. (2003), Disclosure, Corporate Governance, and the Cost of Equity Capital: Evidence from Asia’s Emerging Markets, International journal of business administration, 3, pp. 1-44.
  11. Coelho Faria R., Da Silva Souza G. and Belchior Moreira T. (2005), Public Versus Private Water Utilities: Empirical Evidence for Brazilian Companies, Economic Bulleting, 8(2), pp. 1-7.
  12. Correia T. and Cunha Marques R. (2011), Performance of Portuguese water utilities: how do ownership, size, diversification and vertical integration relate to efficiency?, Water Policy, 13, pp. 343-361.
  13. Daily C.M., Dalton D.R., Cannella A.A. (2003), Corporate Governance: Decades of Dialogue and Data, Academy of Management Review, 28(3), pp. 371-382.
  14. Dalton D.R., Daily C.M., Johnson J.L., Ellstrand A.E. (1999), Number of Directors and Financial Performance: A Meta-Analysis, The Academy of Management Journal, 42(6), pp. 674-686. DOI: 10.2307/256988
  15. De Meo A., Ferrari L. (2018), Political Turnover and the Performance of Local Public Enterprises, CEIS Research Paper 438, Tor Vergata University, CEIS, revised 08 Aug 2018.
  16. Dezsö C.L., Ross D.G. (2012), Does female representation in top management improve firm performance? A panel data investigation, Strategic Management Journal, 9, pp. 1072-1089.
  17. Ding S., Jia C., Wu Z., Zhang X. (2014), Executive political connections and firm performance: comparative evidence from privately-controlled and state-owned enterprises, International Review of Financial Analysis, 36(C), pp. 153-167.
  18. Di Vaio A., Varriale L. and Trujillo L. (2019), Management Control Systems in port waste management: Evidence from Italy, Utilities Policy, 56, pp. 127-135.
  19. Dobbin F., Jung J. (2011), Corporate Board Gender Diversity and Stock Performance: The Competence Gap or Institutional Investor Bias?, North Carolina Law Review, 89(3), pp. 809-838.
  20. Dunleavy P., Hood C. (1994), From old public administration to new public management, Public Money & Management, 14(3), pp. 9-16. DOI: 10.1080/09540969409387823
  21. Erhardt N., Werbel J.D., Shrader C.B. (2003), Board of Director Diversity and firm financial performance, Corporate Governance an International Review, 11(2), pp. 102-111. DOI: 10.1111/1467-8683.00011
  22. Faccio M. (2010), Differences between politically connected and non-connected firms: a cross country analysis, Financial Management, 39(3), pp. 905-927.
  23. Faccio M., Masulis R.W., McConnell J.J. (2006), Political Connections and Corporate Bailouts, Journal of Finance, 61, pp. 2597‐2635.
  24. Fernandez-Feijoo B., Romero S., Ruiz S. (2012), Does Board Gender Composition Affect Corporate Social Responsability Reporting?, International Journal of Business and Social Sciences, 3(1), pp. 31-38.
  25. Ferrero-Ferrero I., Fernández-Izquierdo M.Á., Muñoz-Torres M.J. (2015), Age diversity: An empirical study in the board of directors, Cybernetics and Systems, 46(3-4), pp. 249-270. DOI: 10.1080/01969722.2015.1012894
  26. Florentin D. (2019), From multi-utility to cross-utilities: the challenge of cross-sectoral entrepreneurial strategies in a German city, Urban Studies, 56(11), pp. 2242-2260, DOI: 10.1177/0042098018798974
  27. Forbes D.P., Milliken F.J. (1999), Cognition and Corporate Governance: Understanding Boards of Directors as Strategic Decision-Making Groups, The Academy of Management Review, 24(3), pp. 489-505. DOI: 10.2307/259138
  28. Galbreath J. (2018), Is Board Gender Diversity Linked to Financial Performance? The Mediating Mechanism of CSR, Business & Society, 57(5), pp. 863-889. DOI: 10.1177/0007650316647967
  29. Garcia-Sanchez I.M. (2006), Efficiency Measurement in Spanish Local Government: the Case of municipal Water Service. Review of Policy Research, 23(2), pp. 355-371.
  30. Gnan L., Hinna A., Monteduro F., Scarozza D. (2013), Corporate governance and management practices: stakeholder involvement quality and sustainability tools adoption: evidence in local public utilities, Journal of Management and Governance, 17(4), pp. 907-937.
  31. Gul F.A., Srinidhi B., Ng A. C. (2011), Does Board Gender Diversity Improve the Informativeness of Stock Prices?, Journal of Accounting and Economics, 51(3), pp. 314-338.
  32. Gul F.A., Hutchinson M., Lai K. (2013). Gender-diverse boards and properties of analyst earnings forecasts, Accounting Horizon, 27(3), pp. 511-538.
  33. Gupta S., Kumar S. and Sarangi G.K. (2012), Measuring performance of water service providers in urban India: implications for managing water utilities, Water Policy, 14, pp. 391-408.
  34. Haider H., Sadiq R., Tesfamariam S. (2013), Performance indicators for small- and medium-sized water supply systems: a review, Environmental Review, 22, pp. 1-40.
  35. Hambrick D.C., Werder A., Zajac E.J. (2008), New Directions in Corporate Governance Research, Organization Science, 19(3), pp. 381-385.
  36. Hillman A.J., Shropshire C., Canella A.A. (2007), Organizational predictors of women on corporate boards, Academy of Management Journal, 50(4), pp. 941-952.
  37. Huse M. (2007), Boards, Governance and Value Creation: The Human Side of Corporate Governance, Cambridge University Press, Cambridge. DOI: 10.1017/CBO9780511611070
  38. Jesuka D., Peixoto F.M. (2022), Corporate governance and firm performance: does sovereign rating matter?, Corporate Governance, 22(2), pp. 243-256. DOI: 10.1108/CG-08-2020-0369
  39. Johl S.K., Salami O.L. (2014), Impact of board composition on firm performance: a study on listed firms in Malaysia, Journal of Contemporary Management, 3(3), pp. 94-102.
  40. Jung E.J., Kim J.S., Rhee S.K. (2001), The measurement of corporate environmental performance and its application to the analysis of efficiency in oil industry, Journal of cleaner production, 9(6), pp. 551-563.
  41. Karia A.O., Omari S., Mwanaongoro S., Ondiek A. (2016), Impact of recruitment and selection on performance of the public water utilities in Tanzania, African Journal of Education and Human Development, 2(1), pp. 39-45.
  42. Lückerath-Rovers M. (2010), Women on Board and Firm Performance, Journal of Management & Governance, 17(2), pp. 491-509.
  43. Marinova J., Plantenga J., Remery C. (2010), Gender diversity and firm performance: Evidence from Dutch and Danish boardrooms, discussion paper, University of Utrecht, Utrecht School of Economics, Utrecht, January.
  44. Martinez M., Jamison M., Tillmar M., (2013), Public utilities corporate governance, Journal of Management & Governance, 17, pp. 827-833.
  45. Menozzi A., Urtiaga M.G., Vannoni D. (2012), Board Composition, Political Connections and Performance in State-Owned Enterprises, Industrial and Corporate Change, 21(3), pp. 671-698.
  46. Minichilli A., Gabrielsson J., Huse M. (2007), Board Evaluations: Making a fit between the purpose and the system, Corporate Governance: An International Review, 15(4), pp. 609-622.
  47. Minichilli A., Zattoni A. and Zona F. (2009), Making Boards Effective: An empirical examination of Board task performance, British Journal of Management, 20, pp. 55-74.
  48. Mirza H.H., Mahmood S., Andleeb S., Ramzan F. (2012), Gender Diversity and Firm Performance: Evidence from Pakistan, Journal of Social and Development Sciences, 3(5), pp. 161-166.
  49. Monteduro F. (2014), Public-private versus public ownership and economic performance: evidence from Italian local utilities, Journal of Management & Governance, 18(1), pp. 29-49.
  50. Nafi A., Tkheng J., Beau P. (2015), Comprehensive Methodology for Overall Performance Assessment of Water Utilities, Water Resources Management, 29, pp. 5429-5450.
  51. Nyhan R.C., Marlowe H.A. Jr. (1995), Performance Measurement in the Public Sector: Challenges and Opportunities, Public Productivity & Management Review, 18(4), pp. 333-348.
  52. Ostrom V., Ostrom E. (1971), Public choice: A different approach to the study of public administration, Public Administration Review, 31, pp. 203-216.
  53. Parker L.D., Jacobs K., Schmitz J. (2018), New public management an2d the rise of public sector performance audit: Evidence from the Australian case, Accounting, Auditing & Accountability Journal, 32(1), pp. 280-306. DOI: 10.1108/AAAJ-06-2017-2964
  54. Pechersky A. (2016), Diversity in Board of Directors: review of Diversity as a factor to enhance board performance, Studia commercialia Bratislava, 9(33), pp. 88-100.
  55. Peda P., Grossi G., Liik M. (2013), Do ownership and size affect the performance of water utilities? Evidence from Estonian municipalities, Journal of Management & Governance, 17, pp. 237-259.
  56. Pinto F.S., Simoes P., Cunha Marques R. (2017), Raising the bar: The role of governance in performance assessments, Utilities Policy, 49, pp. 38-47.
  57. Pollitt C. (1993), Managerialism and the Public Services, Basil Blackwell, Oxford.
  58. Rao K., Tilt C. (2016), Board Composition and Corporate Social Responsibility: The Role of Diversity, Gender Strategy and Decision Making, Journal of Business ethics, 138, pp. 327-347.
  59. Reinert R.M., Weigert F., Winnefeld C.H. (2016), Does female management influence firm performance? Evidence from Luxembourg banks, Financial Markets and Portfolio Management, 30(2), pp.113-136.
  60. Renzetti S., Dupont D. (2018), Ownership and performance of water utilities, In Chenoweth J. and Bird J., The Business of Water and Sustainable Development, Routledge, London, pp. 99-110
  61. Romano G., Salvati N., Guerrini A. (2018), Governance, strategy and efficiency of water utilities: the Italian case, Water Policy, 20, pp. 109-126.
  62. Romano G., Guerrini A. (2014), The effects of ownership, board size and board composition on the performance of Italian water utilities, Utilities Policy, 31, pp.18-28.
  63. Rose C. (2007), Does female board representation influence firm performance? The Danish evidence, Corporate Governance an international review, 15(2), pp. 404-413.
  64. Skerlavaj M., Dimovski V. (2006), Study of the mutual connections among information-communication technologies, organisational learning and business performance, Journal for East European Management Studies, 11(1), pp. 9-29.
  65. Tafuro A., Dammacco G., Esposito P., and Mastroleo G. (2022), Rethinking performance measurement models using a fuzzy logic system approach: a performative exploration on ownership in waste management, Socio-Economic Planning Sciences, 79, 101092.
  66. Tarutè A., Gatautis R. (2014), ICT impact on SMEs performance, Procedia – Social and Behavioral Sciences, 110, pp. 1218-1225.
  67. Tutusaus M., Schwartz K., Smit S. (2018), The ambiguity of innovation drivers: The adoption of information and communication technologies by public water utilities, Journal of Cleaner Production, 171, pp. S79-S85.
  68. Van Dooren W., Hoffmann C. (2018), Performance Management in Europe: An Idea Whose Time Has Come and Gone?, In Ongaro E. and Van Thiel S. (Eds), The Palgrave Handbook of Public Administration and Management in Europe. Palgrave Macmillan, London, pp. 207-225.
  69. Wachudi J.E., Mboya J. (2012), Effect of board gender diversity on the performance of commercial banks in Kenya, European Scientific Journal, 8(7), pp. 128-148.
  70. Wellalage N.H., Locke S. (2013), Women on board, firm financial performance and agency costs, Asian Journal of Business Ethics, 2(2), pp.113-127.

Fabio De Matteis, Alessandra Tafuro, Fabrizio Striani, Daniela Preite, Totally Publicly-Owned (TPO) Utilities and Financial Performance: What is the role of some aspects of governance? in "MANAGEMENT CONTROL" 3/2023, pp 89-111, DOI: 10.3280/MACO2023-003005