ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Sudhir NaibSubscribe to Sudhir Naib

Ownership, Competition and Efficiency

One of the main reasons for the present drive towards privatisation is a general belief that change in ownership and competition will lead to efficiency in state owned enterprises (SOEs). This paper attempts to assess the impact of ownership and competition on efficiency of firms. To study the effect of ownership, efficiency of some Indian SOEs is compared (to the extent possible) with comparable private sector firms. To study the effect of competition, the efficiency of SOEs operating under a monopoly structure is compared with SOEs operating under a competitive market environment. Results show that, at the enterprise level, there is little empirical justification for a general presumption in favour of either type of ownership. Further, the empirical study results indicate that more than ownership, it is the degree of competition that affects the performance of an enterprise.

Partial Divestiture and Performance of Indian Public Sector Enterprises

Global empirical studies of privatised firms show a significant improvement in their performance after privatisation. This is true in case of fully as well as partly privatised firms. What is the evidence for Indian divested enterprises in this regard? This paper attempts an analysis by empirically examining the impact of divestiture. The results indicate that in case of partial divestiture, where divested equity is thinly spread with the majority shareholding still with the government, there has been no improvement in terms of profitability and operational efficiency. The paper therefore endorses the government's current policy of strategic sale, where management control passes to the strategic partner.
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