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Impact of MoU on financial performance of public sector enterprises in India

Author

Listed:
  • Seema Gupta
  • P.K. Jain
  • Surendra S. Yadav

Abstract

Purpose - Memorandum of Understanding (MoU) has been conceived as an instrument to quantify/assess social and commercial obligations/performance of central public sector enterprises (PSEs) in India. The purpose of this paper is to measure the financial performance of the MoU PSEs and to compare their performance with PSEs which have not opted for MoU (referred to as non‐MoU PSEs) over a period of 13 years. Design/methodology/approach - Financial ratio is a well accepted technique to assess financial performance. Accordingly, the financial performance of CPSEs has been assessed on the basis of 15 ratios pertaining to the profitability, efficiency, liquidity and solvency. Findings - The findings suggest that MoU seems to have yielded decisive improvement in the performance of PSEs which have signed MoUs during the period of the study under reference. At the same time, the performance of non‐MoU PSEs is unsatisfactory. In sum, MoU have enhanced not only commercial profitability but also have enhanced operational efficiency of the PSEs. Research limitations/implications - The paper focuses only on financial aspects; the significant non‐financial aspects such as social responsibilities, environments etc. are not reckoned in the study to judge the total performance. Originality/value - The study is the first of the type to cover a long time‐span of 13 years to assess virtually all non‐financial CPSEs operating in India.

Suggested Citation

  • Seema Gupta & P.K. Jain & Surendra S. Yadav, 2011. "Impact of MoU on financial performance of public sector enterprises in India," Journal of Advances in Management Research, Emerald Group Publishing Limited, vol. 8(2), pages 263-284, November.
    • Handle: RePEc:eme:jamrpp:v:8:y:2011:i:2:p:263-284
    DOI: 10.1108/09727981111175984
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    Citations

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    Cited by:

    1. Suneel Maheshwari & Vasudha Gupta & Deepak Raghava Naik, 2022. "Development of Risk Index and Risk Governance Index: Application in Indian Public Sector Undertakings," JRFM, MDPI, vol. 15(5), pages 1-19, May.
    2. Shahimi, Shahida & Hafizuddin-Syah, B.A.M & Fuad, Siti Hanisah, 2018. "The Effect of Sustainability Certification for Export on Operational Profitability of Malaysian Palm Oil Companies," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(2), pages 55-67.
    3. Ombir Singh, 2019. "State ownership and performance of firm: evidence from India," Public Sector Economics, Institute of Public Finance, vol. 43(2), pages 195-217.
    4. Roopali Batra & Satish Verma, 2014. "An Empirical Insight into Different Stages of Capital Budgeting," Global Business Review, International Management Institute, vol. 15(2), pages 339-362, June.

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