The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries

TLDR

The study investigates how full or partial privatization between 1980 and 1992 affected the financial and operating performance of 79 firms in 21 developing countries. The authors analyze both market‑adjusted and unadjusted accounting performance indicators to assess these effects. Results show significant gains in profitability, operating efficiency, capital investment, output, employment, and dividends, with a modest decline in leverage only in unadjusted ratios, and robustness across subsamples.

Abstract

ABSTRACT This paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992. We use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures. Both unadjusted and market‐adjusted results show significant increases in profitability, operating efficiency, capital investment spending, output, employment level, and dividends. We also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios. Our results are generally robust when we partition our data into various subsamples.