Economic reforms, corporate governance and privatization method as determinants in performance changes of new privatized
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Economic reforms, corporate governance and privatization method as determinants in performance changes of new privatized firms: the case of MENA countries Oussama Nheri
Ó The Author(s) 2012. This article is published with open access at Springerlink.com
Abstract This paper aims to provide the determinants of how privatization works in some selected Middle East North Africa countries. Using a sample of 75 new privatized firms we examine the performance changes in countries namely Egypt, Morocco, Tunisia and Turkey. We document a significant increase in profitability, efficiency and output as well as a decrease in leverage. We also identify that these improvements vary with economic reforms and environment, effectiveness of corporate governance and the privatization method used. In particular, financial liberalization and control relinquishment by the government are associated with higher efficiency and output. Furthermore, foreign participation and the use of share issue privatization as divestment method appear to have a positive impact on efficiency and output changes. Additionally, the use of private sales is related to a significant decrease in leverage. Finally our results highlight the importance of economic reforms, corporate governance and the choice of privatization method in explaining the post privatization changes in performance. Keywords Corporate governance Privatization method Economic reforms MENA countries Performance JEL Classification
G32 G38
O. Nheri (&) University of Economics and Management of Tunis-Tunisia, BP 248 El Manar II, 2092 Tunis, Tunisia e-mail: [email protected]
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O. Nheri
1 Introduction Privatization of state-owned enterprises (SOEs) has become an important phenomenon in both developed and developing countries. Over the last two decades, SOEs have been privatized at an increasing rate, particularly in developing countries (DCs). Through these privatization programs, the governments want to (1) raise revenue for the state, (2) promote economic efficiency, (3) reduce government interference in the economy, (4) promote wider share ownership, (5) stimulate product market competition, and (6) subject SOEs to capital market discipline (Megginson and Netter 2001). Several multinational studies have documented a performance improvement of new privatized firms (NPFs) in developed and developing countries. For example, Megginson et al. (1994); Boubakri and Cosset (1998) and D’Souza and Megginson (1999) examined the performance of 204 privatized companies in 41 countries. Overall, these studies have documented significant post-privatization improvements in output, efficiency, profitability, capital investment spending and dividend payouts. They also found evidence of decline of both employment and leverage after privatization. In a recent study, Boubakri et al. (2005) reported that changes in performances of NPFs vary with the extent of macro-economic reforms and environment as well as the effectiveness of corporate governance. However, Boycko et al. (1996), Aussenegg
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