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The Financial Economics of Privatization$
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William Leon Megginson

Print publication date: 2005

Print ISBN-13: 9780195150629

Published to Oxford Scholarship Online: October 2005

DOI: 10.1093/0195150627.001.0001

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Empirical Evidence on Privatization's Effectiveness in Nontransition Economies

Empirical Evidence on Privatization's Effectiveness in Nontransition Economies

(p.102) 4 Empirical Evidence on Privatization's Effectiveness in Nontransition Economies
The Financial Economics of Privatization

William Leon Megginson (Contributor Webpage)

Oxford University Press

This chapter examines the impact of privatization on nontransition economies by surveying existing studies on privatization’s economic effectiveness. These studies employ many different empirical methodologies, cover many different regions and time periods, and vary greatly with respect to the type and quality of data employed. The chapter considers studies that examine how privatization impacts the financial and operating performance of divested firms by comparing the pre- versus post-privatization values of several accounting and real output measures. The 87 studies from nontransition economies offer at least limited support for the proposition that privatization is associated with improvements in the operating and financial performance of divested firms. Most offer strong support for this proposition, and only a handful document outright performance declines after privatization. Nearly all studies that examine post-privatization changes in output, efficiency, profitability, capital investment spending, and leverage report significant increases in the first four measures and significant declines in leverage.

Keywords:   privatization, nontransition economies, economic effectiveness, financial performance, operating performance

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