Effects of Privatization on Firms Financial and Operating Performance "Evidence from Jordan"

Lubna Natheer Oqdeh, Mohammad Abu Nassar AbuNassar

Abstract


This study evaluates the financial and operating performance of 43 privatized Jordanian firms, which were privatized during the period 1995-2006. The main objective of the study is to examine whether privatization does improve firms' performance, and whether that improvement differs according to various sub samples. For that purpose, a wide range of accounting performance measures are used as proxies of performance, and the mean performance is calculated for both pre- and post-privatization periods.
The empirical results of this study indicate that there is no significant increase in profitability after privatization at both full sample, as well as, sub samples level. However, the results showed that there is a significant increase in operating efficiency, capital expenditures and dividends achieved by all privatized firms following privatization. Conversely, there is a significant decrease in employment and liquidity for the privatized firms, while leverage has been decreased insignificantly following privatization. Finally, this study showed that firms' performance improvements were more preferable for the group of firms where government ownership exceeds 50% of the total firm before privatization, and for the group of firms with full privatization.

Keywords


Privatization, Financial Performance, Operating Performance, State-Owned Enterprise.

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