The Role of foreign Ownership in Electric Power Companies: Implications for Firm Performance and Electricity Pricing in Laos

Krisada  Krisada; Angkana Kokaew; Oulavieng Somsackxaysompheng

doi:10.14456/jasrru.2025.45

Authors

Krisada Krisada Srinakarinwirot University, Thailand.
Angkana Kokaew Srinakarinwirot University, Thailand.
Oulavieng Somsackxaysompheng Souphanouvong University, Thailand.

DOI:

https://doi.org/10.14456/jasrru.2025.45

Keywords:

Foreign Ownership, Return on Equity, Electricity Price, Firm Performance, Laos

Abstract

This study aims to analyze the effects of foreign investor ownership on the financial performance of electric power companies and household electricity tariffs in Laos. Utilizing monthly data for ten variables from January 2013 to December 2024, a vector autoregression model was estimated, with the optimal lag length determined to be two months based on the Schwarz-Bayesian and Hannan-Quinn criteria, along with the residual testing using the Lagrange Multiplier (LM) test. The findings reveal no statistically significant evidence that foreign equity participation impacts company profitability or electricity prices within the first year, indicating that foreign ownership is financially neutral in the short run. Instead, firm performance and residential tariffs are primarily driven by exchange-rate shocks; specifically, a weakening of the Lao Kip against the USD temporarily boosts return on equity, and currency depreciation is partially passed through to retail tariffs. The findings suggest that policymakers should prioritize managing currency risk—through hedging strategies and automatic FX-adjusted tariffs—rather than limiting foreign ownership

Downloads

Download data is not yet available.

References

Barteková, E. & Ziesemer, T. (2019). The impact of electricity prices on foreign direct investment: evidence from the European Union. Applied Economics. 51(11), 1183-1198.

Carley, S. & Lawrence, S. (2014). Energy-Based Economic Development: How Clean Energy Can Drive Development and Stimulate Economic Growth. Springer London.

Cakan, E., & Ejara, D. D. (2013). On the relationship between exchange rates and stock prices: Evidence from emerging markets. International Research Journal of Finance and Economics, 111(1), 115-124.

Chowdhury, A. K., Dang, T. D., Bagchi, A. & Galelli, S. (2020). Expected benefits of Laos’ hydropower development curbed by hydroclimatic variability and limited transmission capacity: opportunities to reform. Journal of water resources planning and management. 146(10).

Handayani, K., Overland, I., Suryadi, B., & Vakulchuk, R. (2023). Integrating 100% renewable energy into electricity systems: A net-zero analysis for Cambodia, Laos, and Myanmar. Energy Reports, 10, 4849-4869.

Hassaballa, H. (2014). Testing for Granger causality between energy use and foreign direct investment inflows in developing countries. Renewable and Sustainable Energy Reviews, 31, 417-426.

Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica: journal of the Econometric Society, 1551-1580.

Kenney-Lazar, M. (2023). Turning land into capital? The expansion and extraction of value in Laos. Environment and Planning A: Economy and Space, 55(6), 1565-1580.

Mensi, W., Beljid, M., & Managi, S. (2014). Structural breaks and the time-varying levels of weak-form efficiency in crude oil markets: Evidence from the Hurst exponent and Shannon entropy methods. International economics, 140, 89-106.

Mihai, I. & Mihai, C. (2013). The impact of foreign ownership on the performance of Romanian listed manufacturing companies, The International. Journal of Management Science and Information Technology, 10(10), 106-123.

Olson, K.R. & Frenelus, W. (2024) Environmental and Human Impacts of Lancang-Mekong Mainstem and Tributary Dams on China, Laos, Thailand, Myanmar, Cambodia, and Vietnam. Open Journal of Soil Science, 14, 555-605.

Pao, H. T., & Tsai, C. M. (2010). CO2 emissions, energy consumption and economic growth in BRIC countries. Energy policy, 38(12), 7850-7860.

Pasali, S. & Chaudhary, A. (2020). Assessing the impact of foreign ownership on firm performance by size: evidence from firms in developed and developing countries. Transnational Corporations, 27(2), 183-204.

Phetpaseuth, P. (2017). Factors Behind Low Level of Foreign Direct Investment (FDI) to Lao PDR. (Doctoral dissertation, Thammasat University).

Sims, K. (2024). Lao PDR: The Politics of Stability in Turbulent Times. In The Palgrave Handbook of Political Norms in Southeast Asia (pp. 209-226). Singapore: Springer Nature Singapore.

Shareholder Structure (2025). Shareholders by Nationalities. Retrieved August 28, 2025, from https://edlgen.com.la/shareholder-structure/?lang=en

Shyu, C. W. (2022). Energy poverty alleviation in Southeast Asian countries: Policy implications for improving access to electricity. Journal of Asian Public Policy, 15(1), 97-121.

St. John, R. B. (2006). The political economy of Laos: Poor state or poor policy?. Asian Affairs, 37(2), 175-191.

Sythongbay, S. (2021, March). Laos economic structure and economic development policy. In 6th International Conference on Financial Innovation and Economic Development (ICFIED 2021) (pp. 177-185). Atlantis Press.

Yokota, E. & Kutani, I. (2017). Study on Electricity Supply Mix and Role of Policy in ASEAN. ERIA Research Project Report. 3-46.

Zivot, E., & Andrews, D.W.K. (1992). Further evidence on the great crash, the oil price shock, and the unit root hypothesis, Journal of Business and Economic Statistics, 10(3), 251-70.

Zhang, J., & Broadstock, D. C. (2016). The causality between energy consumption and economic growth for China in a time-varying framework. The Energy Journal, 37(1), 29-54.