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PRIVATISING NATIONAL OIL COMPANIES: ASSESSING THE IMPACT ON FIRM PERFORMANCE - page 26 / 30

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corroborate the robustness of the results. The paper has not attempted to empirically

distinguish the impact of privatisation from corporatisation of the NOC (Aivaziana et

al. 2005), or from market liberalisation (Vickers and Yarrow 1988).23 Finally, we are

primarily concerned with the extent of performance changes rather than the sources of

change, i.e. particular firm-level governance or institutional settings.

VII. Conclusion

The global oil and gas industry has been one of the key contributing industries to

privatisation revenues since the late 1970s. Despite their economic and political

importance there has been limited research on the performance and efficiency of

NOCs, whilst the question of resource ownership has regained widespread attention.

This study on the performance impact of privatisation of NOCs therefore addresses a

number of important, yet unanswered questions.

We first analysed the performance impact of initial SIPs using univariate tests and

panel data regression analysis. Univariate tests are an intuitive but simple approach,

whereas panel regression can control for exogenous factors and yield important

insights into the time pattern of performance change. Both approaches yield consistent

and compelling evidence that privatisation of NOCs is indeed associated with higher

firm profitability, (commercial) efficiency, capital investment, output and dividend

payments, as well as with lower financial leverage and employment. There is no

direct evidence, though, of improved operating cost structures or hydrocarbon reserve

replacement. The observed changes are found to be largely firm-specific to the

privatised NOCs rather than being driven by industry-wide developments, and there is

no indication of undue “window dressing” of accounts prior to the transactions. Based

23 Furthermore, the possibility of reverse causation needs to be acknowledged. It is possible that at least some of the companies in the sample have been selected for privatisation because of a significant growth potential, which needed to be funded through the capital markets.

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