Enterprise Performance and Privatization

Aziz Turhan

Carow Hall, 1A
March 10, 2004, 07:00 PM to 07:00 PM

Abstract:

A primary objective of privatization has been defined as to increase the performance of enterprises. On the other hand, some researchers claim that public and private firms do not show any efficiency differences if they face similar competitive environments. Accordingly, this study is expected to show new empirical evidence that ownership is important. A major difficulty, beside comparative efficiency studies, arises from data deficiencies since in most countries public enterprises are usually monopolies or near monopolies. In this sense, my data from the cement sector in Turkey provides a distinctive opportunity. In this dissertation, both proxy variable (accounting measure) and stochastic production frontier approaches are employed to test whether or not the enterprise's performance will progress after privatization. The results demonstrate that substantial changes took place in the firm efficiency after divestiture. This implies that the ownership transfer from public to private significantly affects the enterprise performance. Hence, changes in managerial incentives and enterprise objectives are likely to affect the efficiency of firms, like macroeconomic condiditions, and/or technological developments.

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