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PRIVATISING NATIONAL OIL COMPANIES: ASSESSING THE IMPACT ON FIRM PERFORMANCE - page 3 / 30

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(McPherson 2003), and most accounts of structural inefficiencies at these companies

have been largely anecdotal.

This paper analyses the operating and financial performance of privatised NOCs,

based on a dataset of 60 share-issue privatisations (‘SIPs’) by 28 firms (from 20

countries) in the period 1977 to 2004. For each firm, a total of 22 different metrics is

calculated in order to comprehensively capture firm performance and efficiency.

Privatisation here is understood to be the initial sale of (part of) the government equity

interest to private investors, where the government has been the controlling

shareholder prior to that sale.2 This definition hence includes both partial and full

privatisations via the equity markets, but excludes privatisation sales to other industry

buyers. For the sample of initial SIPs, we first employ a univariate testing

methodology to compare the pre- and post privatisation performance levels of

privatised firms. Secondly, in order to move beyond this simple comparison, we also

investigate the time pattern of changes through a multivariate panel data regression

analysis. Although the focus on initial SIPs is very common in comparable

longitudinal studies3, privatisation is usually undertaken via multiple offerings with

the government being unlikely to transfer control in the very first offering. We

therefore extend – in a third step – the time horizon of analysis to include any possible

follow-on offerings of the respective oil and gas companies.

The remainder of this paper is structured as follows: Section II briefly reviews the

existing literature, Section III describes the dataset of global share-issue privatisations

in the oil and gas sector; Section IV analyses the performance impact associated with

initial SIPs; Section V focuses on follow-on SIPs; Section VI discusses some

potential concerns as to the study design; Section VII concludes.

2 3 ‘State’ and ‘government’ ownership are used interchangeably in this paper. In fact most previous studies restrict themselves to the analysis of initial SIPs. We are not aware of other studies which consider all privatisation offers over time for a select group of companies.

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