Privatisation in Developing Countries

Abstract

We survey empirical studies examining privatisation's effects in developing economies. Most of these studies find that privatisation yields improvements in the operating and financial performance of divested firms, and only a handful document outright performance declines after privatisation. Almost all studies that examine post-privatisation changes in output, efficiency, profitability, capital investment spending and leverage document significant increases in the first four measures and significant declines in leverage. The studies examined here are far less unanimous regarding the impact of privatisation on employment levels in privatised firms. Studies that explicitly address the sources of post-privatisation performance improvement using data from multiple non-transition economies tend to find stronger efficiency gains for firms in regulated industries, in firms that restructure operations after privatisation, and in countries providing greater amounts of shareholder protection. Copyright (c) 2006 The Authors; Journal compilation (c) 2006 Blackwell Publishing Ltd.

Globalisation, accounting and developing countries

“…of state-owned shares in China (Ding & Graham, 2007); and excessive returns for owners where weak markets and little competition prevail (Megginson & Sutter, 2006;Parker & Kirkpatrick, 2005). The WB, IMF and Northern donors like USAID have been accused of ignoring local resistance to privatisation; employing inadequate financial systems for equity sales; ignoring local needs; and neglecting adequate regulation.…”

Privatisation processes and firm performance : the Libyan industrial sector

“…Theoretically, the privatised firms are supposed to use the available resources more efficiently as a law of nature (Seock, 2005). As was shown in the previous discussion, a number of studies showed the effectiveness of privatisation in improving the firm performance, while other studies came to opposite conclusions (Megginson & Sutter, 2006). It is not sufficient to view the transfer of ownership from public to private sector as an end in itself.…”

“…Macro-level and institutional factors, such as market development and liberalisation, are likely to be the key determinants of post-privatisation performance in developing countries. Due to a variety of reasons, particularly the lack of high-quality data, the experience in developing countries is much less well researched (Parker & Kirkpatrick, 2007;Megginson & Sutter, 2006). These findings imply the need to examine the importance of institutional factors and their interactions with endowments and policies.…”

“…One of the most important policy objectives of privatisation is to improve the efficiency and performance of the firms (Mahoobi, 2003). Empirically, a large number of studies have documented superior performance improvement after privatisation, whereas a few have produced opposite conclusions (Megginson & Sutter, 2006 …”

“…Secondly, privatisation is combined with a variety of organisational changes that occur at different settings at the firm, industry, and country level (Boubkri, Cosset, & Guedhami, 2005). These changes are part of the privatisation, and they are often implemented at the same time or immediately after it (Megginson & Sutter, 2006). It may be expected that the success of these policies will be affected by why and how they were implemented (Zhang, Parker, & Kirkpatrick, 2005).…”