Large-scale reluctant privatization: Contradictions and challenges under sanctions

Abstract

The article discusses the practicability for privatizing some large Russian state-owned enterprises (SOEs) under sanctions. Privatization remains a significant trend in the economic policies of many countries, includingRussia. The revenues from privatization demonstrate a steady upward trend worldwide. The effect of external sanctions which create significant difficulties in conducting privatization inRussiadoes not remove from the agenda the issue of privatization of large companies, but also makes it more relevant. Privatization is an effective tool for forming a competitive environment, increasing the efficiency of SOEs and reducing the presence of the state as a direct participant in market relations. The article contains not only theoretical arguments in favor of privatization, but also its relevance, especially considering the sectoral structure of the economy and the performance indicators of large SOEs. A particular feature of the research methodology is the evaluation of the performance of 29 large SOEs on the basis of a universal set of financial indicators. As a benchmark, we use the financial indicators of 144 Russian private companies and wide samples of foreign competitors for each SOE. The results show that the consolidated financial characteristics of SOEs tend to be inferior to those of private companies and foreign competitors. In addition, the total return, including dividend yield, on the state-owned enterprises’ equity is below the return of market benchmark with lowest risk.

Joint-Stock Property Governance in State-Owned Companies in Conditions of Uncertainty

“…Practitioners also agree with this position. Thus, at the government level, the need to liquidate unitary enterprises as an organizational and legal form was fixed by 2018 [ 7 ].…”

“…Therefore, in the short term, new joint-stock companies are doomed to the same level of management efficiency as unitary enterprises, by the state. In this regard, the recommendation of the researchers of the Center for Strategic Research “Effective management of state property in 2018–2024 and up to 2035” on the need to privatize these organizations in one stage seems reasonable [ 7 ]. Indeed, there are no obstacles to the implementation of shares of an enterprise subject to corporatization at the same time, without additional evaluation of shares and their inclusion in the forecast plan (program) of privatization.…”

“…This article is based on a large-scale study conducted in 2018 and expressed in the form of an analytical report of the Center for Strategic Research “Effective management of state property in 2018–2024 and up to 2035” [ 7 ]. The authors have thoroughly studied the efficiency of the public sector of the economy as a whole and given suggestions for its optimization.…”