Does Change in Ownership from Public to Private Affects Firm’s Performance? An Empirical Analysis of Select Central Public Sector Enterprises in India

Abstract

Purpose-In this study, an attempt is made to analyse the effect of ownership change on
firm’s performance, identify the key determinants other than ownership which affects
their performances, and to distinguish the effect of ownership from other factors.
Design/Methodology/Approach- The study is limited to financial and operating
performance analysis of 206 central public sector enterprises in India. Multiple
regression analysis is employed to determine the magnitude and direction of
relationship between dependent and independent variables and identify variables
other than ownership which affects performance of SOEs.
Findings- It is found that ownership transition has statistically significant effect on
performance of firms. Further, firm specific factors and other parallel reforms have
significantly influenced their performance. The evaluated regression model is highly
significant with F-ratio of 49.580 at 99 percentsignificance level. The degree of
explanation of the model is robust with adjusted R2 at 0.974, implying that only 2.60
percent of explanation in the dependent variable cannot be explained by designated
independent /explanatory variables.
Originality/value- The study would be useful to public functionaries to reach to
a policy view on whether to simply transfer ownership or transfer ownership with
increased competition or exposing public enterprises into competition for enhancing
their efficiencies, an alternative to privatization and ownership transfer.
Paper type- Empirical Research Paper.