Selling the Family Silver to Pay the Grocer’s Bill? The Case of Privatization in India
2013, Reforms and Economic Transformation in India
Using data on Indian government-owned firms, we investigate the effect of privatization on the performance of these firms. Our results suggest that privatization is positively associated with the profitability and efficiency of of government-owned firms. Despite the small number of transactions, selling majority equity stakes to private owners has an economically significant impact on firm performance. Moreover, privatization is not associated with layoffs or a decline in employee compensation. These results are robust to controlling for the observable and unobservable characteristics of firms selected for privatization, and industry and country level reforms.
Gupta, Nandini (2013), “Selling the Family Silver to Pay the Grocer’s Bill? The Case of Privatization in India,” forthcoming in Jagdish Bhagwati and Arvind Panagariya (eds.), Reforms and Economic Transformation in India, Oxford University Press: New York, NY.
Privatization, Political economy, Financial market reforms, India.