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Does Privatization Increase Firm Performance in Nigeria?: An Empirical Investigation

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  • Usman, Ojonugwa
  • Olorunmolu, Joseph O.

Abstract

This paper examined the validity of the efficacy of privatization by investigating not only whether privatization has improved financial (profitability) performance of firms but also whether such improvement has impact on the operational efficiency of privatized firms for the period 1990-2001 in Nigeria. Using a panel data for a sample of 20 privatized firms obtained from the Nigerian Stock Exchange and Securities and Exchange Commission, the result showed an increase in all the profitability ratios after privatization. However, only the return on assets and return on sales were significant in explaining the difference between pre- and post-privatization performance of firms in Nigeria. The result of the operational efficiency showed a significant increase in the mean (median) values of sale efficiency and income efficiency. Interestingly, while output (real sales) and employee income of firms significantly increased after privatization, the number of employees decreased insignificantly after privatization. The paper concluded that privatization in Nigeria has worked in the sense that it improves the financial and operational efficiency performance of firms.

Suggested Citation

  • Usman, Ojonugwa & Olorunmolu, Joseph O., 2015. "Does Privatization Increase Firm Performance in Nigeria?: An Empirical Investigation," MPRA Paper 69816, University Library of Munich, Germany, revised 01 Mar 2016.
    • Handle: RePEc:pra:mprapa:69816
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    References listed on IDEAS

    as
    1. 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.
    2. repec:aer:wpaper:175 is not listed on IDEAS
    3. Nellis, John, 2005. "Privatization in Africa: What has happened? What is to be done?," Privatisation Regulation Corporate Governance Working Papers 12200, Fondazione Eni Enrico Mattei (FEEM).
    4. John Nellis, 2005. "Privatization in Africa: What has happened? What is to be done?," Working Papers 2005.127, Fondazione Eni Enrico Mattei.
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    Cited by:

    1. Sunday Ojochenemi Yusufu & Arome Isaac Yusufu & Mohammed Habeeb Abdullahi, 2022. "Privatization and the Efficiency of Selected Enterprises in Nigeria," Journal of Social Sciences Advancement, Science Impact Publishers, vol. 3(1), pages 20-25.

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    More about this item

    Keywords

    Privatization; Firm performance; Operational Efficiency; Profitability; Nigerian Stock Exchange;
    All these keywords.

    JEL classification:

    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

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