The Journal of Finance · 1994 · 313 citations · 0 references
ManagementFinanceFinancial ManagementAgency TheoryCapital StructureCorporate FinanceBoard IndependenceBoard Performance EvaluationCapital FormationCapital Structure DeterminantsOwnership StructurePrivatizationBoard Governance EffectivenessDividend Payout RatioGoverning BoardsLong-term Operating PerformanceOperating Efficiency EffectsOperating Performance AnalysisOwnership Structure Effects
The study compares pre‑ and post‑privatization financial and operating performance of 61 firms across 18 countries and 32 industries that underwent full or partial privatization via public share offerings between 1961 and 1990. The results show that privatization leads to strong performance improvements without sacrificing employment security, including higher real sales, greater profitability, increased capital investment, improved operating efficiency, larger workforces, lower debt, higher dividend payouts, and significant changes in board size and composition.
ABSTRACT This study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990. Our results document strong performance improvements, achieved surprisingly without sacrificing employment security. Specifically, after being privatized, firms increase real sales, become more profitable, increase their capital investment spending, improve their operating efficiency, and increase their work forces. Furthermore, these companies significantly lower their debt levels and increase dividend payout. Finally, we document significant changes in the size and composition of corporate boards of directors after privatization.