Performance of Privatized Enterprises and Impact of Partial Privatization in a Developing Country: Case of Sri Lanka

Abstract

This study investigates the performance of privatized enterprises in a single sector, namely the plantation sector in Sri Lanka. The study provides an insight into the impact of privatization in the context of a developing economy and the impact of State and private ownership on enterprise performance. The panel data enabled the comparative study of enterprise performance under State ownership and management, State ownership and private management and, private ownership and management. It was revealed that after controlling for industry effects, privatization had led to significant increases in profitability, efficiency, capital investment, and output while employment levels had declined. Results were robust when checked for deliberate underperformance. Contrary to the proponents who espouse partial privatization as a solution to nationalist opposition to divesting of State assets, evidence indicates that induction of private management under State ownership had not been able to produce significant improvement in performance.

Disinvestment in Indian central public sector enterprises: a performance improvement measure

“…However as far as the impact of disinvestment on the financial performance is concerned, the proxies of profitability such as ROA and ROE are also found to be influenced significantly but in the negative course. Contrary to majority of the international research studies relating to privatization such as those conducted by Megginson et al, 1994;Boubakri and Cosset, 1998;Megginson and Netter, 2001;Sun et al, 2002;Omran, 2004;Mathur andBanchuenvijit, 2007 andPeter et al, 2010, the overall results of the present study indicate statistically significant fall in the profitability ratios of CPSEs disinvested in India.…”

“…According to 56th annual report presented by the Government of India on the performance of Central Public Sector Enterprises (CPSEs), there were 320 CPSEs in India consisting of 244 operating CPSEs and 76 CPSEs under construction. With the huge business of 18,54,6670 million, these CPSEs employed 1.234 million people (Public Enterprise Survey, 2016). Through these figures one can visualize the role of these CPSEs in the overall progress of the nation.…”

Pre and Post Disinvestment Performance Evaluation of Indian CPSEs

“…Peter et al (2010) investigated the effect in plantation sector of Sri Lanka and have derived significantly positive results in the post privatization period.…”