The Financial and Operating Performance of Privatized Firms during the 1990s

TLDR

The study aims to compare pre‑ and post‑privatization financial and operating performance of 85 firms from 28 industrialized countries privatized via public share offerings between 1990 and 1996. The authors compare pre‑ and post‑privatization financial and operating metrics for these firms across the specified period. Privatization significantly increased profitability, output, operating efficiency, and dividend payments, lowered leverage ratios, raised absolute capital expenditures without increasing them relative to sales, and slightly reduced employment, confirming that privatization yields substantial performance improvements.

Abstract

This study compares the pre‐ and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996. We document significant increases in profitability, output, operating efficiency, and dividend payments—and significant decreases in leverage ratios—for our full sample of firms after privatization, and for most subsamples examined. Capital expenditures increase significantly in absolute terms, but not relative to sales. Employment declines, but insignificantly. Combined with results from two previous, directly comparable studies, these findings strongly suggest that privatization yields significant performance improvements.