From State Financial Loss to Investment Risk: Reconstructing State Financial Accountability in SOEs Management Based on Fairness and Sustainable Governance

Abstract

State-Owned Enterprises (SOEs) play a strategic role in national economic development. Yet, their investment management is constrained by the coexistence of the result-based liability paradigm under Law No. 17 of 2003 and the risk-based governance paradigm introduced by Article 3H of Law No. 16 of 2025. This regulatory disharmony creates legal uncertainty that discourages directors from making strategic investment decisions because commercially reasonable investments may be criminalized when they fail. This study examines the paradigm shift in state financial accountability and reconstructs an accountability model grounded in fairness and sustainable governance. Employing normative legal research with statutory, conceptual, and philosophical approaches, the study analyzes legislation, Constitutional Court decisions, legal doctrines, and relevant literature. The findings demonstrate that investment losses should not automatically be classified as state financial losses. Instead, they should be recognized as ordinary business risks, provided investment decisions are made in good faith, with due care, free from conflicts of interest, and in accordance with the principles of Good Corporate Governance and the Business Judgment Rule. Accordingly, legal accountability should focus on the integrity of the decision-making process rather than solely on financial outcomes. The proposed reconstruction ensures fairness by protecting directors who act professionally and in good faith from unjust criminal prosecution while preserving accountability for managerial negligence and corrupt conduct. This study introduces an investment risk-based state financial accountability model that harmonizes state finance law, SOE law, corporate law, and anti-corruption law by integrating the Business Judgment Rule, fiduciary duty, enterprise risk management, and Environmental, Social, and Governance (ESG) principles. The study’s novelty lies in developing a coherent governance framework that distinguishes business risk from negligence and corruption, strengthens legal certainty, promotes sustainable governance, and supports more competitive and innovative SOEs.