The performance of state-owned enterprises and newly privatized firms: Does privatization really matter?

While it is well documented that privatization leads to an improvement in the performance of state-owned enterprises (SOEs) following divestiture, many of these studies do not consider the performance of control firms in similar pre-privatization situations. The purpose of this paper is to examine the performance of 54 newly privatized Egyptian firms against a matching number of SOEs. By matching sample firms (privatized) with control firms (SOEs) over 1994-98, our analyses show that privatized firms do not exhibit significant improvement in their performance changes relative to SOEs. These findings question the benefits of Egyptian privatization. Nevertheless, evidence from this study could be interpreted to mean that privatization improved the performance of privatized firms, which, in turn, may have had important spillover effects on SOEs. A study over a longer period is needed before these results can be considered conclusive. (C) 2004 Elsevier Ltd. All rights reserved.