The effects of post-privatization government divestments on the financial and operating performance of state owned enterprises in Scandinavia.

Abstract

This study empirically investigates the effects of ongoing privatization on 12 large Scandinavian firms. Using an array of different performance indicators we look at how government ownership affects factors related to financial an operating performance, using measures of profitability, output, investment, efficiency and financial performance and structure. The research is based on yearly accounting and stock data from between 1991 and 2013. We employed a fixed-effects model to estimate effects relating to both the rolling state share, and of a transfer of majority control. Our results indicate that in general, firm profitability, productivity and performance is not significantly influenced by further privatization. In the context of previous empirical studies, the results imply that the major effects on these factors happen primarily in the initial transition from state-owned enterprise into full or partial privatization. We find that there are statistically significant effects relating to capital investment, financial structure, and employment levels when the state divests its majority stake. We also find that dividends are correlated with the level of government ownership. Leverage levels were shown to increase, while capital investment, dividend payouts and employment levels decrease as the state divests its shares.