PRIVATISING NATIONAL OIL COMPANIES: ASSESSING THE IMPACT ON FIRM PERFORMANCE
CHRISTIAN WOLF University of Cambridge, Judge Business School
This study empirically investigates the impact of privatisation on firm performance in the global oil and gas industry, where questions of resource control have regained widespread attention. Using a dataset of 60 public share offerings by 28 National Oil Companies it is shown that privatisation is associated with comprehensive and sustained improvements in performance and efficiency. Over the seven-year period around the initial privatisation offering, return on sales increases by 3.6 percentage points, total output by 40%, capital expenditure by 47%, and employment intensity drops by 35%. Privatisation of all remaining state-owned NOCs would, over the same period, imply an increase in global oil and gas production of 15% over current levels. Many of our observed performance improvements are already realised in anticipation of the initial privatisation date, accrue over time, and level off after the ownership change rather than accelerate. Details of residual government ownership, control transfer, and size and timing of follow-on offerings provide limited incremental explanatory power for firm performance, except for employment intensity. Based on these results partial privatisations in the oil sector might be seen to capture a significant part of the benefits associated with private capital markets without the selling government having to cede majority control.
Key words Privatisation, ownership, corporate performance, anticipation, oil and gas industry
JEL Classifications: C23, G32, L33, L71, M20, Q40
Acknowledgements: I am most grateful to my PhD supervisor, Dr. Michael Pollitt, for his ongoing support and very valuable suggestions for improvement. I thankfully acknowledge the feedback from a number of participants at presentations of earlier drafts of this paper: at the Electricity Policy Research Group (EPRG) and CORE Doctoral Research Conference, both at the University of Cambridge, the 9 European Conference of the International Association for Energy Economics (IAEE), and the 11 Annual Conference of the International Society for New Institutional Economics (ISNIE). Thank you to Kenneth Quinn, Rajat Panikkar and Rahul Shah for arranging access to information databases, and to Thomas Triebs for reviewer comments. This research has been made possible in part due to funding from the Cambridge European Trust, Magdalene College and Judge Business School, Cambridge. th th