Analysis of the effect of state capital injection on the financial performance of state-owned enterprises: 2015–2021

Abstract

Background: State Capital Injection (SCI), or Penyertaan Modal Negara (PMN), is a strategic mechanism through which the Indonesian government allocates investment to State-Owned Enterprises (SOEs). Despite growing SCI allocations—reaching IDR 91 trillion in 2021—questions remain about whether such injections meaningfully improve SOE financial performance. This study examines the effect of SCI on the financial performance of Indonesian SOEs during the period 2015–2021. Methods: The study employs panel data regression with Return on Assets (ROA) as the dependent variable and SCI as the independent variable, controlling for Net Profit Margin (NPM), Total Asset Turnover (TATO), Debt to Equity Ratio (DER), government ownership percentage (Gov_perc), and firm size (SIZE). Two groups were analyzed: Group 1, comprising all SOEs from 2015 to 2021 (809 observations), and Group 2, comprising SOEs that received additional SCI during the same period (84 observations). Fixed Effect models were selected through Chow and Hausman tests. Findings: Results from both groups consistently indicate that SCI has no significant effect on SOE financial performance as measured by ROA. In Group 2, NPM, TATO, and DER were found to significantly influence ROA, whereas SCI remained insignificant. The adjusted R-squared for Group 1 was 23.44%, while Group 2 achieved 96.64%. Conclusion: SCI does not significantly improve SOE financial performance, likely because injected capital is directed toward public service obligations and government mandates rather than commercial profitability. Novelty/Originality of this article: This study provides comprehensive empirical evidence on the SCI-performance nexus across all Indonesian SOEs over a seven-year panel, incorporating both cash and non-cash injections and controlling for sector-specific public service mandates that previous studies largely overlooked.