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The Corporatization and Commercialization of Local Body Entities: A Study of Reported Financial Performance

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  • Jill Hooks
  • Chris Van Staden

Abstract

This research examines the financial performance of three entities over a fifteen‐year period. The aim is to determine the influence of corporatization, commercialization and ownership form on the reported financial performance of the three entities. Underpinning this is the premise, derived from the literature, that financial performance and funding can be expected to change following corporatization and commercialization and will reflect the effects of the form of corporate ownership. A comparison of four performance measures shows that the reported financial performance of the entities improved following corporatization and that their gearing changed. Although the entities were initially similar and faced the same regulatory changes, there were definite differences in the resulting financial performance and gearing between the three entities. In general, by the end of the study period the privatized company was the largest and the one with the highest gearing, the highest ROA and the highest profit margin, whereas the public (council‐owned) company was the smallest and had the lowest profitability. The trust‐owned company performed in between these two, but on average its performance was closer to that of the public company. The study concludes that corporatization, commercialization and ownership form influenced financial performance and the level of debt funding.

Suggested Citation

  • Jill Hooks & Chris Van Staden, 2007. "The Corporatization and Commercialization of Local Body Entities: A Study of Reported Financial Performance," Abacus, Accounting Foundation, University of Sydney, vol. 43(2), pages 217-240, June.
    • Handle: RePEc:bla:abacus:v:43:y:2007:i:2:p:217-240
    DOI: 10.1111/j.1467-6281.2007.00226.x
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    4. Claessens, Stijn & Djankov, Simeon & Pohl, Gerhard, 1997. "Ownership and corporate governance : evidence from the Czech Republic," Policy Research Working Paper Series 1737, The World Bank.
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    1. Hooks, Jill & Stewart, Ross, 2015. "The changing role of accounting: From consumers to shareholders," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 29(C), pages 86-101.

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