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The impact of privatization on firm performance in a transition economy: The case of Vietnam

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  • Truong Dong Loc
  • Ger Lanjouw
  • Robert Lensink

Abstract

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.

Suggested Citation

  • Truong Dong Loc & Ger Lanjouw & Robert Lensink, 2006. "The impact of privatization on firm performance in a transition economy: The case of Vietnam," 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
    DOI: 10.1111/j.1468-0351.2006.00251.x
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    1. Shirley, Mary & Walsh, Patrick, 2000. "Public versus private ownership : the current state of the debate," Policy Research Working Paper Series 2420, The World Bank.
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