Do State-Owned Enterprises Cooperate with Suppliers? Performance Analysis in the Korean Case

In this paper, using performance analysis, we examine cooperation between state-owned enterprises (SOEs) and their suppliers. We use hand-collected Korean SOE customer-supplier relationship data. Considering the ambivalent characteristics of SOEs that pursue both financial performance goals and public performance goals, we analyze financial statements and the results of Korean government performance evaluations (GPE). We find that the higher the gross margin or sales growth in an SOE, the lower the supplier's gross margin. We also find that the higher the GPE results in an SOE, the lower the supplier's financial performance (gross margin, operating margin, profit margin, return on assets, and return on equity). Additionally, no evidence of improved financial performance of suppliers was found after they began supplying SOEs. It is therefore unlikely that the customer-supplier relationship between SOEs' customers and their suppliers contributes to the growth of the suppliers.