Sources of Performance Improvement for Privatized Firms in Nigeria
21 Pages Posted: 13 Dec 2006
This study examines the performance of privatized firms in Nigeria, with the insurance sector as the case study. We computed pre- and post-privatization means for, profitability, growth, employment, dividend, leverage, and operating efficiency, for a period of 10 years and use the Wilcoxon signed-rank test to check for significant changes in each of the variables. We then draw conclusions based on the standardized test statistic Z. In addition to the Wilcoxon test, the kruscal-Wallis test was used to trace the differences in performance changes for the various groups of the sub sample. The results from test of predictions for the full sample of the privatized insurance companies lend support to the proposition that privatization improves the operating efficiency/performance of the privatized insurance companies. Except for changes in employment, which shows a negative results, we document significant increase in profitability, efficiency, dividend payments and capitalization for all the privatized insurance companies. The kruskal-wallis test shows that, return on assets increases significantly better for insurance companies that had less than 50 percent change in their board of directors. Return on assets, return on turnover and debt equity ratio increases significantly better for those insurance companies that had no change in their chief executives. While other variables, return on net worth, return on investment, capital employed, and dividend payout, increases significantly better for those insurance companies that had change in their chief executives. Our results also indicate significant differences in employment for the insurance companies that restructure versus insurance companies that did not restructure. Insurance companies that restructure maintain significantly higher levels of employment following privatization. Generally, the results from other variables imply that although restructuring generally leads to greater post-privatization performance improvement, the Nigerian privatized insurance companies experienced a negative performance improvement. Finally, the results from the regression analysis shows that except for the restructuring that has lower correlation with the variables used for measuring the performance, all other factors such as changes in the composition of board of directors, chief executive and the nature of business carried out by the insurer shows higher correlation with the performance variables.
Keywords: Privatisation, Performance, Nigerian Firms
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