Determinants of post-privatisation performance of Spanish divested firms

Abstract

[EN] This paper analyses the factors which may explain the improvements in performance taking place after privatisations. Using a sample of 58 Spanish privatised firms within the period 1985-2000, we find no significant mean increases in industry adjusted profitability and efficiency following privatisation over a medium term horizon (three years), although the results vary according to the privatised firm. More than 50% of the firms show increases in profitability and over 45% show increases in efficiency after the first stage of the privatisation process. When we analyse how different characteristics of the privatisation processes may explain the observed performance changes, the results suggest that competition may play an important role in the success of privatisation processes. Efficiency gains seem to take place in competitive markets, not in utilities. The results also suggest some positive influence of factors such as the entrance of foreign investors, the relinquishment of control by the State over privatised firms and the firms’ size on the performance of privatised firms.