By Alejandro Saltiel, CFA
There are important differences in emerging market ((EM)) companies, especially when it comes to those with significant government ownership (state-owned enterprises, or SOEs) and those without it (non-SOEs).
Government ownership may lead to corporate governance issues that arise from the inherent principal-agent problem and cause operational inefficiencies and weaker levels of profitability.
The predominant industries among non-SOEs are those associated with strong earnings and revenue growth potential, such as consumer and technology companies. Non-SOEs also have higher aggregate profitability metrics than the broad index, MSCI Emerging Markets ((EM)) Index, and provide