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.