## The Nexus Between Public Enterprise Governance, Financial Performance, and Macroeconomic Vulnerabilities: An Application to Moldova

_IMF Working Papers, March 4, 2022_

## Source details

**Canonical URL:** [The Nexus Between Public Enterprise Governance, Financial Performance, and Macroeconomic Vulnerabilities: An Application to Moldova](https://www.imf.org/en/publications/wp/issues/2022/03/04/the-nexus-between-public-enterprise-governance-financial-performance-and-macroeconomic-513885)

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## Bibliographic details
- Authors: Amgad Hegazy, Arturo Navarro
- Published: March 4, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400202612.001

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### Summary and main conclusion
- Strong governance frameworks for public enterprises have long been an anchor of stability and efficiency underpinning their financial operations and performance.
- Cross-country experiences with the adoption of robust legal, regulatory and institutional arrangements—in line with international best practices—proved critical in:
  - reducing well-known risks and vulnerabilities from such companies,
  - clarifying the role of the state,
  - improving the management of state assets, and
  - ensuring a level playing field for the private sector to prosper.
- Moldova stands to greatly benefit from strengthening its public corporate governance regime to:
  - put its public enterprises on a stronger footing,
  - address vulnerabilities, and
  - improve market structure.

### Moldova’s public enterprise sector and vulnerabilities
- Moldova’s large public enterprise sector of over 900 companies faces elevated risks that:
  - amplify fiscal and macroeconomic vulnerabilities,
  - undermine market competition,
  - undermine productivity, and
  - undermine private investment.

### Key thematic findings
- Relationship between governance and financial performance:
  - Robust legal, regulatory and institutional arrangements are critical to improving financial operations and performance of public enterprises.
- Macroeconomic and fiscal linkages:
  - Weak public enterprise governance amplifies fiscal and macroeconomic vulnerabilities through contingent liabilities and distorted market conditions.
- Market structure and private sector effects:
  - Poorly governed public enterprises can erode a level playing field, reducing private sector competition and investment.

### Policy implications and recommendations (high-level)
- Strengthen Moldova’s public corporate governance regime to:
  - clarify the role of the state vis-à-vis public enterprises,
  - improve management of state assets,
  - reduce fiscal and macroeconomic vulnerabilities associated with public enterprises, and
  - enhance market competition and conditions for private sector investment.
- Align legal, regulatory, and institutional arrangements with international best practices to reduce risks and improve public enterprise financial performance.

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2022/03/04/the-nexus-between-public-enterprise-governance-financial-performance-and-macroeconomic-513885_