IDEAS home Printed from https://ideas.repec.org/a/sae/manlab/v42y2017i2p120-134.html
   My bibliography  Save this article

Pre and Post Disinvestment Performance Evaluation of Indian CPSEs

Author

Listed:
  • Priya Mandiratta
  • G.S. Bhalla

Abstract

The fact that government-owned firms are typically less proficient or at least less gainful than private owned firms is widely hypothesized. Therefore, the disinvestment policy aims at dropping the participation of the public sector in the economic actions of the country in order to support private sector. The research endeavour set out to empirically examine the financial and operating performance of 15 Central Public Sector Enterprises (CPSEs) disinvested in India through public share offering mode during 2003–2012. Sample firms represent four cognate groups, that is, manufacturing, mining, electricity and service sectors. Through ratio analysis, different ratios such as return on assets, return on equity, sales efficiency, net income efficiency, debt equity, dividend payout, real sales and employment levels have been computed. Using the traditional pre versus post privatization comparisons and panel data estimation techniques, researchers have found significant increase in sales efficiency and net income efficiency, that is, overall operating efficiency, whereas insignificant results have been witnessed in the case of profitability position. This study provides new empirical evidence about performance changes in CPSEs disinvested through involvement of retail investors, that is, public offering mode in Indian economy.

Suggested Citation

  • Priya Mandiratta & G.S. Bhalla, 2017. "Pre and Post Disinvestment Performance Evaluation of Indian CPSEs," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 42(2), pages 120-134, May.
    • Handle: RePEc:sae:manlab:v:42:y:2017:i:2:p:120-134
    DOI: 10.1177/0258042X17716601
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0258042X17716601
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0258042X17716601?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Paul H. Malatesta & Kathryn L. DeWenter, 2001. "State-Owned and Privately Owned Firms: An Empirical Analysis of Profitability, Leverage, and Labor Intensity," American Economic Review, American Economic Association, vol. 91(1), pages 320-334, March.
    2. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. "The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-452, June.
    3. T. G. Arun & F. I. Nixson, 2000. "The Disinvestment of Public Sector Enterprises: The Indian Experience," Oxford Development Studies, Taylor & Francis Journals, vol. 28(1), pages 19-32.
    4. Gouri, Geeta, 1997. "The new economic policy and privatization in India," Journal of Asian Economics, Elsevier, vol. 8(3), pages 455-479.
    5. Qian Sun & Wilson H. S. Tong & Jing Tong, 2002. "How Does Government Ownership Affect Firm Performance? Evidence from China’s Privatization Experience," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(1‐2), pages 1-27.
    6. Ghosh, Saibal, 2008. "Does divestment matter for firm performance?: Evidence from the Indian experience," Economic Systems, Elsevier, vol. 32(4), pages 372-388, December.
    7. repec:bla:jfinan:v:53:y:1998:i:3:p:1081-1110 is not listed on IDEAS
    8. Gupta Seema & P.K. Jain & Surendra S. Yadav & V.K. Gupta, 2011. "Financial performance of disinvested central public sector enterprises in India: An empirical study on select dimensions," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 1(4), pages 1-3.
    9. Bortolotti, Bernardo & D'Souza, Juliet & Fantini, Marcella & Megginson, William L., 0. "Privatization and the sources of performance improvement in the global telecommunications industry," Telecommunications Policy, Elsevier, vol. 26(5-6), pages 243-268, June.
    10. Mohammed Omran, 2004. "Performance Consequences of Privatizing Egyptian State-Owned Enterprises: The Effect of Post-Privatization Ownership Structure on Firm Performance," Multinational Finance Journal, Multinational Finance Journal, vol. 8(1-2), pages 73-114, March-Jun.
    11. Gongmeng Chen & Michael Firth & Wei Wei Zhang, 2008. "The efficiency and profitability effects of China's modern enterprise restructuring programme," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 16(1), pages 74-91, May.
    12. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W., 1996. "Second-best economic policy for a divided government," European Economic Review, Elsevier, vol. 40(3-5), pages 767-774, April.
    13. Qian Sun & Wilson H. S. Tong & Jing Tong, 2002. "How Does Government Ownership Affect Firm Performance? Evidence from China's Privatization Experience," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(1&2), pages 1-27.
    14. Mathur, Ike & Banchuenvijit, Wanrapee, 2007. "The effects of privatization on the performance of newly privatized firms in emerging markets," Emerging Markets Review, Elsevier, vol. 8(2), pages 134-146, May.
    15. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, April.
    16. Emita W. Astami & Greg Tower & Rusmin Rusmin & John Neilson, 2010. "The effect of privatisation on performance of state‐owned‐enterprises in Indonesia," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 18(1), pages 5-19, May.
    17. I. Serdar Dinc & Nandini Gupta, 2011. "The Decision to Privatize: Finance and Politics," Journal of Finance, American Finance Association, vol. 66(1), pages 241-269, February.
    18. Comstock, Arthur & Kish, Richard J. & Vasconcellos, Geraldo M., 2003. "The post-privatization financial performance of former state-owned enterprises," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(1), pages 19-37, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ghosh, Sudipta & Aithal, Sreeramana, 2022. "A Relative Study of Average Investment Returns between Manufacturing Sector and Service Sector of CPSEs in India," MPRA Paper 112061, University Library of Munich, Germany.
    2. Matthew Baird & A.V. Chari & Shanthi Nataraj & Alexander Rothenberg & Shqiponja Telhaj & L. Alan Winters, 2019. "The public sector and the misallocation of labor: evidence from a policy experiment in India," CEP Discussion Papers dp1596, Centre for Economic Performance, LSE.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Knyazeva, Anzhela & Knyazeva, Diana & Stiglitz, Joseph E., 2013. "Ownership change, institutional development and performance," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2605-2627.
    2. Phi, Nguyet Thi Minh & Taghizadeh-Hesary, Farhad & Tu, Chuc Anh & Yoshino, Naoyuki & Kim, Chul Ju, 2019. "Performance Differential Between Private and State-Owned Enterprises: An Analysis of Profitability and Leverage," ADBI Working Papers 950, Asian Development Bank Institute.
    3. Calomiris, Charles W. & Fisman, Raymond & Wang, Yongxiang, 2010. "Profiting from government stakes in a command economy: Evidence from Chinese asset sales," Journal of Financial Economics, Elsevier, vol. 96(3), pages 399-412, June.
    4. Zhi Wang & Miao Yu, 2022. "Political embeddedness and firms' growth," Kyklos, Wiley Blackwell, vol. 75(1), pages 127-153, February.
    5. Ghosh, Saibal, 2008. "Does divestment matter for firm performance?: Evidence from the Indian experience," Economic Systems, Elsevier, vol. 32(4), pages 372-388, December.
    6. Liao, Jing & Young, Martin, 2012. "The impact of residual government ownership in privatized firms: New evidence from China," Emerging Markets Review, Elsevier, vol. 13(3), pages 338-351.
    7. Mathur, Ike & Banchuenvijit, Wanrapee, 2007. "The effects of privatization on the performance of newly privatized firms in emerging markets," Emerging Markets Review, Elsevier, vol. 8(2), pages 134-146, May.
    8. Ben-Nasr, Hamdi, 2016. "Labor protection and government control: Evidence from privatized firms," Economic Modelling, Elsevier, vol. 52(PB), pages 485-498.
    9. Fabio Monteduro, 2014. "Public–private versus public ownership and economic performance: evidence from Italian local utilities," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(1), pages 29-49, February.
    10. Ghulam, Yaseen, 2017. "Long-run performance of an industry after broader reforms including privatization," Research in International Business and Finance, Elsevier, vol. 42(C), pages 745-768.
    11. Vaaler, Paul M. & Schrage, Burkhard N., 2007. "Residual State Factors, Policy Stability and Financial Performance Following Strategic Decisions by Privatizing Telecoms," Working Papers 07-0102, University of Illinois at Urbana-Champaign, College of Business.
    12. Marwan Mohamed Abdeldayem & Saeed Hameed AL Dulaimi, 2019. "Privatisation as a Worldwide Tool of Economic Reform: A Literature Review," International Journal of Social and Administrative Sciences, Asian Economic and Social Society, vol. 4(2), pages 66-84, June.
    13. Sumit K. Majumdar, 2008. "Why Privatize? The Decline of Public Ownership in India and its Impact on Industrial Performance," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 9(2), pages 293-336, September.
    14. Jan Hagemejer & Joanna Tyrowicz, 2020. "A New Instrument for Measuring the Local Causal Effect of Privatisation on Firm Performance," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 35-52.
    15. Anna P. I. Vong & Duarte Trigueiros, 2014. "Reversal in the relative performance of state- and legal person-owned companies during the Chinese split share structure reform," Applied Economics, Taylor & Francis Journals, vol. 46(15), pages 1728-1750, May.
    16. Quan Cheng & Alex Ng, 2023. "Achieving stability and prosperity: The Chinese way," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-15, December.
    17. Knyazeva, Anzhela & Knyazeva, Diana & Stiglitz, Joseph, 2009. "Ownership changes and access to external financing," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1804-1816, October.
    18. Ghosh, Saibal, 2009. "Do productivity and ownership really matter for growth? Firm-level evidence," Economic Modelling, Elsevier, vol. 26(6), pages 1403-1413, November.
    19. Du, Min & Boateng, Agyenim, 2015. "State ownership, institutional effects and value creation in cross-border mergers & acquisitions by Chinese firms," International Business Review, Elsevier, vol. 24(3), pages 430-442.
    20. Uddin, Md Hamid, 2016. "Effect of government share ownership on corporate risk taking: Case of the United Arab Emirates," Research in International Business and Finance, Elsevier, vol. 36(C), pages 322-339.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:manlab:v:42:y:2017:i:2:p:120-134. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.xlri.ac.in/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.