Assessing the strategic impact of a performance compliance index on the performance of state-owned enterprises

Abstract

The persistent poor performance of state-owned enterprises (SOEs) remains a significant topic in public-sector discourse. This ongoing issue has sparked extensive debate among scholars, policymakers, and government officials (Erasmus, 2024). The existing literature indicates that the absence of a universally adopted performance framework fosters an environment conducive to several influencing factors, such as significant power distance, cronyism, and materialistic culture (Kaunda & Pelser, 2022). The objective of this study was to examine how components of the performance compliance index (PCI) impact the performance of SOEs in South Africa. Adopting a positivist approach and a quantitative research design, the analysis examined the annual reports of 18 SOEs over a 10-year period (2013–2022). A panel fixed effects (FE) model was applied, with Hausman tests used to select the most appropriate estimator and address model limitations. The results show that the Z-score has a negative and statistically significant effect on SOE performance. The corporate governance index (CGI) demonstrated a positive, significant relationship with performance, whereas developmental performance index (DPI) showed a significant adverse effect. Conversely, the Public Finance Management Act (PFMA) and human capital index (HCI) indicators had limited measurable effects during the study period. Data limitations and the absence of qualitative evidence constrained the scope of the study. Future research should include all SOEs and adopt mixed-method approaches to gain a deeper understanding of broader organizational dynamics.