The Impact of Privatization on Financial Performance on State Owned Enterprises (SOEs) in Pakistan

Abstract

There are many studies for developed and developing countries but none of these studies has extensively covered the privatization program from structural and contextual issue of accounting standpoint in Pakistan. The core part of this study is to test the hypothesis that privatization in Pakistan has increased the profitability, operating performance, capital investment spending, higher dividend payments and output of the firms but lower leverage ratios and employment of firms after divestiture. This dissertation aims to examine and evaluate the financial and operating performance of only those firms, which were privatized during years discussed in this study. The closed down units have also been discussed for their negative impact on economy. The sample consists of 33 companies from 8 sectors. In overall analysis we documented significant increases in financial, automobile, cement, energy, fertilizer, engineering sectors’ post privatization performance but ghee and chemical sectors did not perform well in almost all proxies. In sector-wise analysis the results are almost similar in financial, automobile and cement sectors. Empirical evidences show that profitability, efficiency, investment, employment and dividend increases after privatization. While output and employment decrease in financial, increase in automobile and cement sector.