Investigation on privatization effect of state-owned firms in Taiwan

Abstract

In this paper we examine the effects of privatization in Taiwan from six financial and operational dimensions using a sample of twenty one privatized state-owned firms from 1989 to 2006. Applying the absolute performance measure of Megginson, Nash and Van Randenborgh [10] and the relative performance measure modified from that of Ogden and Watson [13], our findings show that the performance of the nonfinancial firms in our sample improved in almost all dimensions during their post-privatization periods, which echoes the findings of previous studies. However, in contrast to previous literature, our empirical results show that the performance of financial sample firms did not significantly improve in many dimensions after privatization. In fact, they underperformed. This “converse” privatization effect observed in our study to some extent implies incompletion of the Taiwanese government’s privatization policies.

Keywords and phrases:

• Privatization
• corporate performance
• state-owned corporations
• Taiwan