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The Financial and Operating Performance of Privatized Firms during the 1990s
Author(s) -
D'souza Juliet,
Megginson William L.
Publication year - 1999
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.00150
Subject(s) - profitability index , leverage (statistics) , operating leverage , business , dividend , earnings before interest and taxes , sample (material) , monetary economics , payment , operating margin , operating expense , finance , financial system , economics , return on assets , chemistry , chromatography , machine learning , computer science
This study compares the pre‐ and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996. We document significant increases in profitability, output, operating efficiency, and dividend payments—and significant decreases in leverage ratios—for our full sample of firms after privatization, and for most subsamples examined. Capital expenditures increase significantly in absolute terms, but not relative to sales. Employment declines, but insignificantly. Combined with results from two previous, directly comparable studies, these findings strongly suggest that privatization yields significant performance improvements.