From State to Market: A Survey of Empirical Studies on Privatization

TLDR

The paper surveys the literature on privatization of state‑owned enterprises, concentrating on empirical evidence of its effects on firm performance. It reviews the history of privatization, theoretical and empirical comparisons of state‑ versus privately owned firms, types of privatization, performance gains, investor outcomes, and impacts on capital markets and corporate governance. Across most settings, privatization increases efficiency, profitability, and financial health and rewards investors, though results vary more in transition economies where the identity of new owners and managers is decisive.

Abstract

This study surveys the literature examining the privatization of state-owned enterprises(SOEs). We overview the history of privatization, the theoretical and empirical evidence on the relative performance of state owned and privately owned firms, the types of privatization, if and by how much has privatization improved the performance of former SOEs in both non-transition and transition countries, how investors in privatizations have fared, the impact of privatization on the development of capital markets and corporate governance. We concentrate on the empirical evidence on the effects of privatization on firm performance. In most setting privatization "works" in that the firms become more efficient, more profitable, financially healthier, and reward investors. While this holds in both transition and non-transition economies, there is more variation in transition economies. Especially in transition economies, the identity of the new owners and managers is important in determining post-privatization performance.