Chapter

Empirical Evidence on Privatization's Effectiveness in Nontransition Economies

William Leon Megginson

in The Financial Economics of Privatization

Published in print February 2005 | ISBN: 9780195150629
Published online October 2005 | e-ISBN: 9780199835768 | DOI: http://dx.doi.org/10.1093/0195150627.003.0004
 Empirical Evidence on Privatization's Effectiveness in Nontransition Economies

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This chapter examines the impact of privatization on nontransition economies by surveying existing studies on privatization’s economic effectiveness. These studies employ many different empirical methodologies, cover many different regions and time periods, and vary greatly with respect to the type and quality of data employed. The chapter considers studies that examine how privatization impacts the financial and operating performance of divested firms by comparing the pre- versus post-privatization values of several accounting and real output measures. The 87 studies from nontransition economies offer at least limited support for the proposition that privatization is associated with improvements in the operating and financial performance of divested firms. Most offer strong support for this proposition, and only a handful document outright performance declines after privatization. Nearly all studies that examine post-privatization changes in output, efficiency, profitability, capital investment spending, and leverage report significant increases in the first four measures and significant declines in leverage.

Keywords: privatization; nontransition economies; economic effectiveness; financial performance; operating performance

Chapter.  22885 words. 

Subjects: Financial Markets

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