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Explaining Performance Changes in Newly Privatized Firms[Note 1. Address for reprints: William A. Andrews, School of Business ...]
Author(s) -
Andrews William A.,
Dowling Michael J.
Publication year - 1998
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/1467-6486.00111
Subject(s) - stock (firearms) , business , principal–agent problem , agency (philosophy) , sample (material) , industrial organization , marketing , economics , finance , accounting , corporate governance , mechanical engineering , philosophy , chemistry , epistemology , chromatography , engineering
Much debate has been generated about whether privatization tends to enhance firm financial performance. The research presented here seeks to identify the strategic choices that differentiated firms with superior post‐privatization performance from those with inferior post‐privatization performance. Using agency theory as a theoretical foundation, it is hypothesized that superior post‐privatization firm performance will be associated with (1) the government not retaining a significant stock holding, (2) changes in leadership, (3) management stock options being initiated, (4) employee head count being reduced, and (5) the company being restructured financially. The sample draws from 41 privatized firms from six industry classifications and 15 countries. To accommodate comparisons of small subsamples, non‐parametric statistical methods are used. Controlling for size, industry and country (economic/regulatory effects), the hypotheses are generally supported except for the one relating to headcount.