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The impact of privatization on firm performance in a transition economy


  • Truong Dong Loc
  • Ger Lanjouw
  • Robert Lensink


The Vietnamese privatization programme, launched in 1992, differs from the usual Western privatization programmes in terms of the residual percentage of shares owned by the state and the portion of shares owned by insiders. This begs the question whether these differences influence the effects of the programme on firm performance. This study measures the impact of privatization on firm performance in Vietnam by comparing the pre- and post-privatization financial and operating performance of 121 former state-owned enterprises (SOEs). We find significant increases in profitability, sales revenues, efficiency and employee income. Results of applying the 'difference-in-difference' (DID) method, wherein a control group of firms is used to pick up the influence of other determinants of firm performance, suggest that the performance improvements may indeed be associated with equitization. Regression analyses reveal that firm size, residual state ownership, corporate governance and stock market listing are key determinants of performance improvements. Copyright (c) The European Bank for Reconstruction and Development, 2006.

Suggested Citation

  • Truong Dong Loc & Ger Lanjouw & Robert Lensink, 2006. "The impact of privatization on firm performance in a transition economy," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(2), pages 349-389, April.
  • Handle: RePEc:bla:etrans:v:14:y:2006:i:2:p:349-389

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    References listed on IDEAS

    1. Granick,David, 1987. "Job Rights in the Soviet Union," Cambridge Books, Cambridge University Press, number 9780521332958, March.
    2. Susan J. Linz, 1993. "Barriers to innovation: Economic impact of "perestroika"," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(4), pages 437-470, December.
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    Cited by:

    1. Ngo My Tran & Walter Nonneman & Ann Jorissen, 2014. "Government Ownership and Firm Performance: The Case of Vietnam," International Journal of Economics and Financial Issues, Econjournals, vol. 4(3).
    2. Ngo My Tran & Ann Jorissen & Walter Nonneman, 2015. "Privatization of Vietnamese Firms and Its Effects on Firm Performance," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(2), pages 202-217, February.
    3. Ramstetter, Eric D. & Ngoc, Phan Minh, 2013. "Productivity, ownership, and producer concentration in transition: Further evidence from Vietnamese manufacturing," Journal of Asian Economics, Elsevier, vol. 25(C), pages 28-42.
    4. VU, Tien Manh & Yamada, Hiroyuki, 2017. "Convergence of public and private enterprise wages in a transition economy: Evidence from a distributional decomposition in Vietnam, 2002–2014," AGI Working Paper Series 2017-10, Asian Growth Research Institute.
    5. Enrico Santarelli & Hien Thu Tran, 2016. "Diversification strategies and firm performance in Vietnam," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(1), pages 31-68, January.
    6. repec:clh:resear:v:5:y:2012:i:3 is not listed on IDEAS

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