The Financial and Operating Performance of Privatized Firms during the 1990s


  • Juliet D'souza,

  • William L. Megginson

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    • Mercer University and the University of Oklahoma, respectively. We gratefully acknowledge the financial support of the University of Oklahoma's Michael F. Price College of Business and of the University of Georgia Research Foundation in acquiring the data used in this study. We are grateful for comments received from participants at the 1998 Financial Management Association and 1999 American Finance Association annual meetings, the 1998 NYSE/Paris Bourse conference on Global Equity Markets, the 1999 Conference on Privatization and the Kuwaiti Economy in the Next Century, and seminars at the World Bank, the City University Business School (London), London Guildhall University, and the University of Oklahoma. We also thank Bernardo Bertolotti, Narjess Boubakri, Maria Boutchkova, Jean-Claude Cosset, Michael DeWally, Kojo Menyah, Rob Nash, Jeff Netter, and especially Han Kim (our discussant at the 1999 AFA conference) for their specific comments and recommendations.


This study compares the pre- and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996. We document significant increases in profitability, output, operating efficiency, and dividend payments—and significant decreases in leverage ratios—for our full sample of firms after privatization, and for most subsamples examined. Capital expenditures increase significantly in absolute terms, but not relative to sales. Employment declines, but insignificantly. Combined with results from two previous, directly comparable studies, these findings strongly suggest that privatization yields significant performance improvements.