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Selling family silver to pay the grocers bill? The case of privatization in India

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  • Nandini Gupta
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    Abstract

    Using data on Indian government-owned firms, we investigate the effect of privatization on the performance of these firms. Our results suggest that privatization is positively associated with the profitability and efficiency of of government-owned firms. Despite the small number of transactions, selling majority equity stakes to private owners has an economically significant impact on firm performance. Moreover, privatization is not associated with layoffs or a decline in employee compensation. These results are robust to controlling for the observable and unobservable characteristics of firms selected for privatization, and industry and country level reforms.

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    File URL: http://indianeconomy.columbia.edu/sites/default/files/working_papers/wp_2010-2_v2.pdf
    File Function: First version, 2010
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    Bibliographic Info

    Paper provided by School of International and Public Affairs, Columbia University in its series Working Papers with number 2222.

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    Length: 29 pages
    Date of creation: Oct 2010
    Date of revision: Oct 2010
    Handle: RePEc:ecq:wpaper:2222

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    Web page: http://indianeconomy.columbia.edu/
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    Related research

    Keywords: India; privatization; government owned firms; industry reforms;

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    1. Bernardo Bortolotti & Paolo Pinotti, 2008. "Delayed privatization," Temi di discussione (Economic working papers) 663, Bank of Italy, Economic Research and International Relations Area.
    2. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    3. Jones, Steven L. & Megginson, William L. & Nash, Robert C. & Netter, Jeffry M., 1999. "Share issue privatizations as financial means to political and economic ends," Journal of Financial Economics, Elsevier, vol. 53(2), pages 217-253, August.
    4. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    5. Gupta, Nandini & Ham, Jhon C. & Svejnar, Jan, 2008. "Priorities and sequencing in privatization: Evidence from Czech firm panel data," European Economic Review, Elsevier, vol. 52(2), pages 183-208, February.
    6. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, 04.
    7. Megginson, William Leon, 2005. "The Financial Economics of Privatization," OUP Catalogue, Oxford University Press, number 9780195150629, September.
    8. Clarke, George R G & Cull, Robert, 2002. "Political and Economic Determinants of the Likelihood of Privatizing Argentine Public Banks," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 165-97, April.
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