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The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis
Author(s) -
MEGGINSON WILLIAM L.,
NASH ROBERT C.,
RANDENBORGH MATTHIAS
Publication year - 1994
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/j.1540-6261.1994.tb05147.x
Subject(s) - business , dividend , capital expenditure , debt , dividend payout ratio , finance , capital structure , work (physics) , investment (military) , external financing , debt ratio , capital (architecture) , operating expense , monetary economics , financial system , economics , dividend policy , law , engineering , history , mechanical engineering , archaeology , politics , political science
This study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990. Our results document strong performance improvements, achieved surprisingly without sacrificing employment security. Specifically, after being privatized, firms increase real sales, become more profitable, increase their capital investment spending, improve their operating efficiency, and increase their work forces. Furthermore, these companies significantly lower their debt levels and increase dividend payout. Finally, we document significant changes in the size and composition of corporate boards of directors after privatization.