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PRIVATISING NATIONAL OIL COMPANIES: ASSESSING THE IMPACT ON FIRM PERFORMANCE - page 2 / 30

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I. Introduction

The impact of ownership on corporate performance has been frequently

scrutinised in the economic literature ever since Adam Smith observed that

“characters do not exist who are more distant than the sovereign and the entrepreneur”

(Smith 1776, p.771). But it was not until the 1980s that political programs of

ownership reform refocused the research attention on the issue (Vickers and Yarrow

1991) – if there were any systematic disparities between public and private

ownership, was privatisation per se the appropriate tool to unlock such performance

differentials?

Detailed privatisation studies exist for a number of individual industries as well as

for individual countries and larger cross-industry, cross-country samples. This paper,

however, is the first comprehensive study of share-issue privatisations in the global

oil

and

gas

industry,

one

of

the

‘commanding

heights’

of

the

economy

where

questions of resource control have recently regained widespread attention.1 Oil and

gas has been, together with utilities and telecommunications, one of the key

contributing industries to privatisation revenues (Megginson 2005), and in fact it is

the sale of a minority stake in BP in 1977 which is often considered to have been the

starting point of modern-day privatisation programmes. But although a number of

private oil and gas companies rank amongst the largest corporations in the world,

more than 90% of the world’s hydrocarbon reserves remain under the control of

nation states and their National Oil Companies (‘NOCs’) (PIW 2007). Despite their

economic importance there has been surprisingly little systematic research on NOCs

1 For the purposes of this paper, the oil and gas industry is defined to include those companies that generate the majority of their revenues in either exploration and production of hydrocarbons or in refining and marketing of oil products.

2

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