An investigation of the post-Privatization Companies’ Financial and Operating Performance: Further Evidence based on an Emerging Economy Data

Abstract

During the past four decades, privatization of state owned enterprises (SOEs) has become an essential phenomenon in both developed and developing countries. Although several studies have offered some evidence for developing countries, the Middle East experience has remained unexplored. This study tries to fill this gap by extending the literature on developing countries to the specific context of the Middle East region in general, and Egypt in particular. An attempt is also made to assess whether privatization in Egypt has achieved its objectives in terms of improved financial and operating performance following the privatization programme. Egypt is the focus of the study due to its vast privatization experience as compared with other countries. In the early 1990s Egypt–as an emerging economy-introduced a series of major economic reforms.  A key element of these reforms involved the privatization of state owned enterprises and this paper compares the pre- and post-privatization financial and operating performance of 60 Egyptian companies that had been privatized by 2017.  Our results reveal that when performance in the 3 years following privatization is compared with performance in the 3 years prior to privatization then overall there is clear evidence of increases in real sales, profitability, operating efficiency, capital investment and dividend payments and decreases in debt levels and employment levels.