Partial Privatization and Firm Performance: Evidence from India

Nandini Gupta

Industrial Organization from University Library of Munich, Germany

Abstract: Privatization in India is mostly limited to the diffuse sale of minority stakes in firms. Since control rights have not been transferred to private owners it is widely contended that the process has had little impact on firm behavior. We find however that even the sale of minority stakes has a positive impact on firm performance and productivity. As the government remains the controlling owner in these firms, we infer that the improvement is attributable to the role of the stock market in monitoring managerial performance rather than to a change in owners' objectives. Consistent with this interpretation, we find that improvements in earnings are due to an increase in the productivity of labor rather than layoffs. Partial privatization continues to affect the sales and operating efficiency of firms when we control for competitive conditions, and the evidence also suggests that privatization and competition have a complementary impact on firm performance.

Keywords: partial privatization; India; manager incentives; firm behavior; stock market monitoring (search for similar items in EconPapers)
JEL-codes: G14 G3 L2 L3 M2 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2001-12-22
New Economics Papers: this item is included in nep-mic
Note: Type of Document - pdf; prepared on pc; to print on HP; pages: 31; figures: included.
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Citations: View citations in EconPapers (3)

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Working Paper: Partial Privatization And Firm Performance: Evidence From India (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpio:0112002

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