The Impact of Privatization on Firm Performance in a Transition Economy: The Case of Vietnam
Truong Dong Loc
University of Cantho - School of Economics and Business Administration (SEBA)
University of Groningen - Department of International Economics and Business
University of Groningen - Department of Economics, Econometrics and Finance; Wageningen UR - Development Economics Group
Economics of Transition, Vol. 14, No. 2, pp. 349-389, April 2006
The Vietnamese privatization programme, launched in 1992, differs from the usual Western privatization programmes in terms of the residual percentage of shares owned by the state and the portion of shares owned by insiders. This begs the question whether these differences influence the effects of the programme on firm performance. This study measures the impact of privatization on firm performance in Vietnam by comparing the pre- and post-privatization financial and operating performance of 121 former state-owned enterprises (SOEs). We find significant increases in profitability, sales revenues, efficiency and employee income. Results of applying the 'difference-in-difference' (DID) method, wherein a control group of firms is used to pick up the influence of other determinants of firm performance, suggest that the performance improvements may indeed be associated with equitization. Regression analyses reveal that firm size, residual state ownership, corporate governance and stock market listing are key determinants of performance improvements.
Number of Pages in PDF File: 41Accepted Paper Series
Date posted: May 25, 2006
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