Economic reforms, corporate governance and privatization:evidence from developing countries

Abstract

The aim of this paper is to shed some light on the underpinning conditions of success of the privatization policy. We particularly examine the changes in performance of newly privatized firms in developing countries and examine the determinants of these changes. The preliminary results we reach in this study show that economic reforms and corporate governance mechanisms are important factors in the success of privatization in developing countries. More specifically, we document that profitability, efficiency, investment expenditures as well as output changes are higher for firms in liberalized countries, with more developed markets and where the protection of property rights is better (i.e., a friendlier legal and institutional environment for shareholders). Furthermore, the presence of foreign investors in the ownership structure of the newly privatized firms seems to have an important effect on the extent of performance gains after privatization.