The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis





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    • Megginson is from the University of Georgia, Nash is from the University of Baltimore, and van Randenborgh is from the University of Bielefeld, Bielefeld, Germany. We would like to express our gratitude to the many government ministries and embassies and corporate public relations departments around the world that assisted with the data collection for this project. We especially appreciate the information and comments provided by Rebecca Candoy-Sekse and John Nellis of the World Bank and Edgar Harrell and Karim Sohl of Price Waterhouse. Feedback from seminar participants at the National Bureau of Economic Research, the 1992 Financial Management Association meeting, the University of Georgia, Virginia Polytechnic Institute, the University of Baltimore, and the University of Dayton, as well as the helpful comments and recommendations of Scott Atkinson, David Blackwell, Michael Brennan, David Carter, Mary Dehner, John Goodman, Rob Hansen, Steven Isberg, Steve Jones, Stefanie Kleimeier, Carlos Maquieira, Jeff Netter, Annette Poulsen, Meir Schneller, Andrei Shleifer, Joe Sinkey, Rene Stulz, and an anonymous referee are also appreciated. Finally, the financial support of the Departments of Management and Banking and Finance, Terry College of Business, and of the University of Georgia Research Foundation is gratefully acknowledged.


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.