Liberalization, Corporate Governance and the Performance of Newly Privatized Firms

43 Pages Posted: 22 Jun 2001

See all articles by Narjess Boubakri

Narjess Boubakri

American University of Sharjah - School of Business and Management; HEC Montreal - Department of Finance

Omrane Guedhami

University of South Carolina - Moore School of Business

Jean-Claude Cosset

HEC Montreal

Date Written: June 20, 2001

Abstract

This paper seeks to provide an answer to the following question: When and how does privatization work? Using a unique sample of 189 firms headquartered in 32 developing countries, we document a significant increase in profitability, efficiency, investment and output. Next, using univariate tests, we show that changes in performance are related to economic reforms and conditions and to corporate governance. For example, we find that privatization yields better results when it is preceded by stock market and trade liberalization. The results of a regression analysis then indicate that macroeconomic and corporate governance variables explain post-privatization performance improvements. In particular, economic growth, control relinquishment by government and foreign ownership are key determinants of profitability changes. We also find higher improvements in efficiency and output for firms from countries with more developed stock markets and where the protection of property rights is better. Finally, our results suggest that trade openness is an important determinant of post-privatization increase in investment.

Suggested Citation

Boubakri, Narjess and Guedhami, Omrane and Cosset, Jean-Claude, Liberalization, Corporate Governance and the Performance of Newly Privatized Firms (June 20, 2001). 3rd Annual Fin. Mkt. Dev. Conference, Hong Kong 2001. Available at SSRN: https://ssrn.com/abstract=270642 or http://dx.doi.org/10.2139/ssrn.270642

Narjess Boubakri (Contact Author)

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

HOME PAGE: http://www.aus.edu

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Jean-Claude Cosset

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6872 (Phone)
514-340-6987 (Fax)

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