Performance Consequences of Privatizing Egyptian State-Owned Enterprises: The Effect of Post-Privatization Ownership Structure on Firm Performance

Abstract

This paper evaluates the financial and operating performance of newly privatized Egyptian state-owned enterprises and determines whether such performance differs across firms according to their new ownership structure. The Egyptian privatization program provides unique post-privatization data on different ownership structures. Since most studies do not distinguish between the types of ownership, this paper provides new insight into the impact that post-privatization ownership structure has on firm performance. The study covers 69 firms, which were privatized between 1994 and 1998. For these newly privatized firms, this study documents significant increases in profitability, operating efficiency, capital expenditures, and dividends. Conversely, significant decreases in employment, leverage, and risk are found, although output shows an insignificant decrease following privatization. The empirical results also show that Egyptian state-owned enterprises, which were sold to anchor-investors and employee shareholder associations, seem to outperform other types of privatization, such as minority and majority initial public offerings (JEL: G32, L33).Keywords: privatization, SOEs, Egypt, and ownership structure. Multinational Finance Journal 741. For example, state versus private ownership and domestic versus foreign ownership.2. Two methods of sale (full and partial privatization) were executed to provide four marked types of ownership. Full privatization yielded three types: (1) majority initial public offerings-at least 51% of a firm's shares were sold to public via the stock market, (2) employee shareholder associations (ESAs)-the majority of a firm's shares were sold to either ESAs, or (3) anchor-investors. Partial privatization yielded the fourth type: (4) minority initial public offering-less than 50% of a firm's shares were sold to the public via the stock market with the rest remaining in the government's hands.

Disinvestment in Indian central public sector enterprises: a performance improvement measure

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