Firm Operating Performance After Privatization: Causes And Consequences

The impact of privatization on corporate performance has long been a focus of economics. However, no conclusive results have been reached so far. The disagreements have resulted from two main aspects: choice of performance measure and models of abnormal performance. Based on the experience before, the paper employs the ROA,CFOA and ACC as the measure of performance. We employ two different approaches: industry median(mean) and matched firmed to investigate the performance of privatization.We found that, the ROA of the first two years after privatization enhanced significantly compared to the previous year. But the ROA of the third year and the average annual after privatization has no significant difference compared with the previous year. This indicated the performance after privatization declined after two years. The CFOA has no significant differences compared to the previous year in the three years after privatization, even in the first two years which the ROA improved significantly. The paper further proved that tunneling can explain the problem that the performance declined. Finally, according to the size of tunneling we divided the companies into two groups and found the more the companies tunneled, declined more its performance. This group can bi accounted for to 25%. This shows that some companies tunneled the listed companies, which make their performance dropped significantly.