Operating performance and corporate governance of supplier companies to governmental agencies Available to Purchase

This paper examines operating performance and corporate governance of 181 companies over the period 2003- 2008 (563 firm-year observations), whose customers are governmental agencies, and contrasts their performance to that of companies that have no governmental customers. The sample firms are classified into firms whose customers are (1) domestic governmental agencies, (2) foreign governmental agencies, (3) state governmental agencies, or (4) different combinations of the 3 types. The results show that firms that supply domestic and/or foreign government customers have significantly higher operating income, profit margin and return on asset and lower operating expenses than firms that supply state government customers and than their matched industry peers who do not supply any government customers. These government-supplier firms have lower managerial ownership than their industry peers which suggests potential room for agency problems to develop. Firms that supply domestic and/or foreign government customers have significantly lower executive compensation than firms that supply state government customers and than their matched industry peers.