The impact and implications of privatization and residual ownership on performance

: a cross-country analysis of the Euro Zone

Abstract

This study investigates and compares the different implications of Non-Residual and Residual privatization operations, recognizing its dynamic character. Focusing on the Euro Zone countries privatizations through Public Offers we are able to provide evidence that only Non-Residual operations are associated with improvements in profitability. However, while such improvements appear to come from an improved financial management, improvements in Operating Profits take place actually prior to privatization, suggesting that governments can be effective in restructuring SOEs. Regarding residual ownership of firms by the State, our evidence shows that it does not negatively impact profitability, which is supported by the fact that residual privatizations yields little changes. On the contrary, we argue that our findings add to the scarce empirical evidence stating that residual ownership may be beneficial for both governments and firms. This further leads us to conclude that an effective corporate governance system and market conditions are actually more relevant to performance than ownership nature. Finally, our results in terms of efficiency question previous literature stating that privatization results in improved efficiency as our findings of improvements seem to apply to both privatized firms and their peers. We thus support authors arguing for the failure of most proxy measures used in previous studies to capture changes in operating efficiency.

Date of Award	2013
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Pramuan Bunkanwanicha (Supervisor)