Expected Performance Improvement of Privatized Industries: Fact or Fiction?

In theory, it is often expected that the financial performance and productivity of state owned firms are improved after privatization. But some empirical researches conducted in western countries have found findings which do not confirm this expectation. In addition, there is no solid research evidence available regarding the performance of Iranian firms being privatized in recent decade. Thus, there exist considerable doubts about the real effects of privatization on the performance of such firms. This research was carried out to investigate the effects of privatizing state owned Iranian firms on theirfinancial/operational performance. Therefore, six years of financial/operational performance of 42 firms was examined against some generally accepted criteria. All of the sample firms were privatized during 1990-2008 by transferring at least 50% of their shares to the private sector. Performances of these firms three years before and three years after privatization were studied. Results revealed that the transfer of shares (change in ownership of the firms) has caused only small amount of improvement in the firm's profitability and human resource productivity, whereasprivatizationhas had no significant effects on the firms total factor productivity (TFP), total assets turn over, and capital productivity.