Determinants of Performance Improvements in Privatized Firms: The Role of Restructuring and Corporate Governance

Intra-Industry Effects of Privatization Announcements: Evidence from Developed and Developing Countries

“…If investors' expectations about privatization can be inferred from the rival firms' stock price reaction, then this result implies that the privatized firms are likely to be more efficient and competitive in developing countries than in developed countries. This assertion finds support in recent studies by Boubakri and Cosset (1998) and D'Souza, Megginson and Nash (2000) who document stronger performance improvement for privatized firms in developing countries.…”

“…Prior empirical studies however show that privatization brings about a change in the firm's objectives as well as a change in the owners and managers' incentives that often result in a more focused and efficient organization (Megginson et al (1994) and D'Souza, Megginson and Nash (2000)). The public trading of the firm's shares facilitates the adoption of market oriented compensation plans as management compensation can be tied to the firm's stock price.…”

“…The trading of the firms' shares following privatization and the attendant monitoring of the firms' performance, together with the linking of managers' remuneration to stock market performance, could spur management to become more efficient, productive and accountable. Megginson, Nash, van Randenborgh (1994), Boubakri and Cosset (1998) and D'Souza, Megginson and Nash (2000) suggest that capital market monitoring that 10 accompanies privatization triggers improvements in performance, but Holstrom and Tirole (1995) argue t hat the benefits from capital market monitoring depends on the level of sophistication of the market and the intensity of the monitoring. A well-developed and active capital market allows the newly privatized firms greater access to capital needed to finance profitable projects.…”

“…In this paper, we build on prior studies by focusing on the valuation effects of privatization announcements on rival firms. This issue is important because if privatization creates a competitive environment and incentives for better performance for the privatized firms, as has been documented by Megginson, Nash, van Randenborgh (1994), Boubakri and Cosset (1998) and D'Souza, Megginson and Nash (2000), then a more efficient competitor will appear in the industry as the privatization process releases the former SOE from the control and interference of the government. The privatization of state enterprises could thus hurt rival firms through increased competition from the newly privatized firm that, by virtue of its hitherto monopoly position, may have immense competitive advantage and market power.…”

Quality Management and Supply Chain Management Practices towards Operational Performance: A Study of the Rubber Manufacturing Industry of Sri Lanka

“…To enhance OP, firms need to set up barriers that make imitation difficult through continual investment to improve the firm advantage, making this a long-run cyclical process (Day & Wensley, 1988). Souza and William (2000) suggested that cost and quality is a part of operational performance dimension. Improving further, Vokurka, Zank, and Lund, (2002), Fawcett and Smith (1995) and White (1996) described the operational performance dimensions included price/cost, quality, responsiveness, and time to market.…”