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From State to Market: A Survey of Empirical Studies on Privatization

Author

Listed:
  • William L. Megginson

    (Michael F. Price College of Business, University of Oklahoma)

  • Jeffry M. Netter

    (Terry College of Business, University of Georgia)

Abstract

This study surveys the academic and professional literature examining the privatisation of state-owned enterprises (SOEs), with a focus on empirical studies. Privatisation has been instrumental in reducing state ownership in many countries and had a transforming effect on global stock markets, although the role of SOEs in many other countries is similar to what it was two decades ago. Countries have adopted large-scale privatisation programs primarily for two reasons: first, the conclusive evidence that privately-owned firms outperform SOEs and, second, the empirical evidence clearly shows that privatisation significantly (often dramatically) improves the operating and financial performance of divested firms. Governments can also raise significant revenues by selling SOEs. While the choice between privatisation via public share offering versus through asset sales is still imperfectly understood, factors such as firm size, government fiscal condition, and the state of national economic development are important influences. Further, those countries which have chosen the mass (voucher) privatisation route have done so largely out of necessity--and face ongoing efficiency problems as a result. Governments have great discretion in pricing the SOEs they sell, especially those being sold via public share offering, and they use this discretion to pursue political and economic ends. Finally, investors who purchase the shares of firms being privatised earn significantly positive excess returns both in the short-run (due to deliberate underpricing of share issues by the government) and over one, three, and five-year investment horizons.

Suggested Citation

  • William L. Megginson & Jeffry M. Netter, 1999. "From State to Market: A Survey of Empirical Studies on Privatization," Working Papers 1999.1, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:1999.1
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    Citations

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    Cited by:

    1. Bernardo Bortolotti & Domenico Siniscalco & Marcella Fantini, 2000. "Privatisation and Institutions: A Cross Country Analysis," CESifo Working Paper Series 375, CESifo.
    2. repec:hal:journl:dumas-00811476 is not listed on IDEAS
    3. Cook, Paul & Uchida, Yuichiro, 2001. "Privatisation and Economic Growth in Developing Countries," Centre on Regulation and Competition (CRC) Working papers 30634, University of Manchester, Institute for Development Policy and Management (IDPM).
    4. Anke S. Kessler & Christoph Lülfesmann, 2002. "Monitoring and Productive Efficiency in Public and Private Firms," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(2), pages 167-187, February.
    5. Bernardo Bortolotti & Marcella Fantini & Carlo Scarpa, 2000. "Why Do Governments Sell Privatised Companies Abroad?," William Davidson Institute Working Papers Series 293, William Davidson Institute at the University of Michigan.
    6. Walsh, Patrick Paul & Whelan, Ciara, 2001. "Firm performance and the political economy of corporate governance: survey evidence for Bulgaria, Hungary, Slovakia and Slovenia," Economic Systems, Elsevier, vol. 25(2), pages 85-112, June.
    7. Evgeni Peev, 2001. "Corporate Governance Transformation in Transition Economies: Evidence from Bulgaria," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(2), pages 289-300.
    8. International Monetary Fund, 2006. "Germany; Selected Issues," IMF Staff Country Reports 06/436, International Monetary Fund.
    9. Gene Chang & Josef Brada, 2011. "A Model of the Macroeconomic Effects of Privatization on Employment in Transition and Developing Countries with an Application to China," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 18(2), pages 310-327, December.
    10. Luigi Benfratello, 1999. "Determinants And Effects Of Mergers And Acquisitions: An Analysis Based On The Notifications To Antitrust Authorities," CERIS Working Paper 199915, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.

    More about this item

    Keywords

    Capital; Investment; Employment; Financing policy; Ownership structure; Investment banking; Venture capital; Brokerage; Public economics; Sources of revenue; Public enterprises; Boundaries of public and private enterprise; Privatisation; Contracting out;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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