X hits on this document

PDF document

PRIVATISING NATIONAL OIL COMPANIES: ASSESSING THE IMPACT ON FIRM PERFORMANCE - page 25 / 30

66 views

0 shares

0 downloads

0 comments

25 / 30

(Bozec et al. 2006). Fully state-owned companies often pursue non-commercial,

socio-political goals, it is argued, so that lower profits do not necessarily represent

higher costs and technical inefficiencies but rather social outputs. As Boardman and

Vining (1989) point out, such posited social benefits can either be external to the

NOC (e.g. provision of public infrastructure) or internal to the NOC (most likely in

the form of overstaffing or higher wages). External benefits are very difficult to

measure or even to disprove, but an examination of profitability differences can at

least reveal the shadow prices for such outputs.22 Internal benefits, such as excessive

employment levels, would usually only be achieved at a net deadweight loss because

they are a form of producer surplus, where the firm is no natural monopoly but has a

degree of market power (Boardman and Vining 1989). In addition to these theoretical

considerations, this paper also addresses the issue through the wide range of chosen

metrics. It is not clear that all processes in a state-owned firm would be deliberately

inefficient; however it is more plausible to assume that some of the fruits of

reasonably efficient operations would be directed towards non-commercial purposes.

To address the issue of commodity price volatility, the real terms oil price has

been included as a control variable in the regression models. Through the use of an

industry control group we were able to establish that the observed performance

changes are largely firm-specific, and the share return analysis rejected the hypothesis

of excessive accounting window dressing prior to the privatisation. Accounting

differences between countries are not an issue, since firm performance is compared on

a longitudinal basis within each country. The checks on the econometric model have

been described earlier, and different model specifications have been tested to

22 As an example, Italian NOC Eni managed to improve its Return on Assets (based on the three-year averages pre vs. post initial SIP) by 5.0 percentage points – within a declining real oil price environment. Based on the average asset value of 44.4bn and assuming a 40% corporate tax rate, this implies a pre-tax allowance for social expenditure of 3.7bn per year.

25

Document info
Document views66
Page views66
Page last viewedFri Oct 28 21:37:26 UTC 2016
Pages30
Paragraphs1873
Words11467

Comments