The financial and operating performance of privatized companies in Turkey

Abstract

This paper examines the post privatization performance of privatized companies using a sample of privatization cases in Turkey completed within 1990-2000. Research findings indicate that, when the performance criteria for private enterprises are considered, privatization in competitive industries results in significant increases in return on investment. This increase comes from increasing financial leverage, whereas return on assets variable does not contribute significantly to increase in return on investment. The cash flow margin increases postprivatization, however, asset productivity declines, which is due to the huge asset expansion in privatized companies. The expansion in assets doesn’t represent increased capital investment, and primarily financed by financial leverage. Privatization benefits stem from increased production efficiency and eliminating redundant labor force.