The effect of privatisation on performance of state‐owned‐enterprises in Indonesia

Abstract

Purpose The purpose of this paper is to investigate whether partially privatised state‐owned‐enterprises (SOEs) perform significantly better than fully SOEs in the developing country of Indonesia. Design/methodology/approach This study uses a data set of 157 SOEs in Indonesia for the year 2006 to examine the issue of ownership structure and its performance. Findings Statistical analysis supports the hypothesis that SOEs with private sector ownership have higher levels of performance than those fully owned by the government. There are also significant differences in financial leverage, firm size, assets‐in‐place, financial statement reliability, and industry variances between fully privatised and partially privatised SOEs. Originality/value These findings support the Indonesian Government move towards further privatisation in that SOEs with at least some private sector ownership have greater performance levels.