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Ownership-efficiency relationship and the measurement selection bias

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  • Richard Bozec
  • Mohamed Dia
  • Gaétan Breton

Abstract

This study analyses the bias in the selection of performance measures for ownership comparisons, which depends on the specific objectives of the firms being compared. Our sample includes 13 Canadian state-owned enterprises (SOEs), commercialized and/or privatized between 1976 and 2001. To replace profitability measures and reduce biases, we propose the use of technical efficiency, which provides for SOEs' specificities. Overall, the results clearly support the view that privatization has no impact on a firm's technical efficiency, the only positive impact being related to a change in the objectives of the firm while using profitability measures. The results of this study raise the question of the validity of comparisons between SOEs and private firms when using profitability indicators. The potential bias in favour of the private firms contributes to a misleading image of the public sector being presented as inferior and inefficient. The use of more sophisticated measures, such as data envelopment analysis, suggests conflicting conclusions. This study also casts doubt on the legitimacy of the privatization program initiated around the world and more specifically in Canada in which the main justification for such a reform has been to increase the performance of SOEs. Copyright (c) The Authors Journal compilation (c) 2006 AFAANZ.

Suggested Citation

  • Richard Bozec & Mohamed Dia & Gaétan Breton, 2006. "Ownership-efficiency relationship and the measurement selection bias," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 46(5), pages 733-754.
  • Handle: RePEc:bla:acctfi:v:46:y:2006:i:5:p:733-754
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    Cited by:

    1. Wolf, C. & Pollitt, M.G., 2008. "Privatising national oil companies: Assessing the impact on firm performance," Cambridge Working Papers in Economics 0811, Faculty of Economics, University of Cambridge.
    2. Slobodan Cerovic & Nemanja Stanišic & Tijana Radojevic & Nikica Radovic, 2015. "The Impact of Ownership Structure on Corporate Performance in Transitional Economies," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 17(38), pages 441-441, February.
    3. Vergés, Joaquim, 2014. "RESULTADOS y consecuencias DE LAS PRIVATIZACIONES de Empresas Públicas: Una perspectiva internacional
      [THE PRIVATISATION OF STATE OWNED ENTERPRISES. RESULTS AND CONSEQUENCES:An international empiri
      ," MPRA Paper 62655, University Library of Munich, Germany, revised 05 Mar 2015.
    4. Wolf, C, 2008. "Does Ownership Matter? The Performance and Efficiency of State Oil vs. Private Oil (1987-2006)," Cambridge Working Papers in Economics 0828, Faculty of Economics, University of Cambridge.
    5. Wolf, C. & Pollitt, M.G., 2009. "The Welfare Implications of Oil Privatisation: A Cost-Benefit Analysis of Norway’s Statoil," Cambridge Working Papers in Economics 0912, Faculty of Economics, University of Cambridge.
    6. Wolf, Christian, 2009. "Does ownership matter? The performance and efficiency of State Oil vs. Private Oil (1987-2006)," Energy Policy, Elsevier, vol. 37(7), pages 2642-2652, July.

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