From State to Market: A Survey of Empirical Studies on Privatization

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper was developed with financial support from the SBF Bourse de Paris and the New York Stock Exchange, and the assistance and comments of George Sofianos, Bill Tschirhart, Jean-Claude Cosset, Kathy Dewenter, Ranko Jelic, John Nellis, Rob Nash, Marc Lipson, Harold Mulherin, and Annette Poulsen is gratefully acknowledged. Earlier drafts of the authors' privatization works cited herein have benefited from comments received from participants at the 1993 National Bureau of Economic Research corporate finance conference, the 1994-1998 American Finance Association annual meetings, the 1994 American Economic Association meeting, the 1994 Political Economy Research Center Privatization Forum, the 1995-1998 Financial Management Association annual meetings, the 1995 European Finance Association meeting, the 1997 NYSE Cancun Conference on Global Equity Issuance, and seminars at the Copenhagen Business School, the Norwegian School of Management, the University of Chile, the Federal Reserve Bank of New York, Emory University, the University of Georgia, Florida State University, Virginia Tech, Indiana University, The University of Houston, and Tulane University. All remaining errors are the authors' alone. This study surveys the academic and professional literature examining the privatization of stateowned enterprises (SOEs), with a focus on empirical studies. The paper is written from the perspective of a policy-maker weighing the adoption of a national privatization program, who seeks answers to the following questions: (1) How large an impact have privatization programs actually had thus far on state involvement in different national economies?; (2) Has the decision to privatize been based on dissatisfaction with the economic performance of SOEs, and is there a viable policy alternative to divestment?; (3) Have privatization programs significantly improved the operating and financial performance of the companies divested?; (4) Terms of use: Documents in EconStor mayOnce the decision to privatize is made, how do governments select the appropriate method and sequencing of selling state-owned assets?; (5) How do governments price the SOEs they wish to sell and how do they decide which potential buyers to favor?; and (6) Have investors who purchase the shares of privatized firms experienced positive short and long-term returns?Privatization has been instrumental in reducing state ownership in many countries and had a transforming effect on global stock markets, al...

Does Foreign Ownership Influence Firm Profitability? Evidence from the Tunisian Context

“…Most theoretical and empirical studies in this area support the point of view of the positive effect of privatization on firm performance (Megginson, 2005;Megginson & Netter, 2001). Gupta (2005) found, with a sample of 40 Indian public firms, a significant improvement in profitability growth rate, labor productivity and expenses.…”

Theories of the (state-owned) firm

“…Among most scholars and policymakers in the West, it has become an Barticle of faith^that SOEs are less efficient than private firms (Dewenter & Malatesta, 2001: 320). Thus, instead of being studied on their own, SOEs only deserve to be privatized (Filatotchev, Buck, & Zhukov, 2000;Megginson & Netter, 2001;Vickers & Yarrow, 1991). The privatization movement throughout the world since the 1980s seems to suggest that SOEs are a transitional organizational form destined to become relics of history (Spicer, McDermott, & Kogut, 2000).…”

“…While proponents of state ownership stress the proposition above, it is clearly contestable from both the theoretical arguments made by Hayek (1945) and the weight of evidence from worldwide experiments with SOEs (Megginson & Netter, 2001;Shleifer, 1998;Vickers & Yarrow, 1991). In general, the economic performance of SOEs has been lackluster.…”

Corporate Philanthropic Disaster Response and Ownership Type: Evidence from Chinese Firms’ Response to the Sichuan Earthquake

“…For example, economists usually view government ownership as being detrimental to corporate performance (Megginson and Netter, 2001;Shleifer and Vishny, 1998). Thus, Estrin and Perotin (1991) argue that firms with the government as an owner will not concentrate on profit maximization because the state has both political and economic objectives, and that corporate performance in such firms will be inferior because of weaker governance arrangements.…”

“…Dougherty and McGuckin (2008) show that government decentralization played an important role in improving the performance of state-owned firms. Megginson and Netter (2001) conclude that ''[the weight of empirical research] is now decisively in favor of the proposition that privately owned firms are more efficient and more profitable than otherwise comparable state owned firms.'' As such, we predict state ownership hinders CPDR.…”