Determination and Evaluation of Privatization Effects on Financial Performance of Firms in Tehran Stock Exchange (TSE)

Abstract

Problem statement: Does privatization process, as form of transferring the control of public (state-owned) companies via Tehran Stock Exchange, effect positively on their financial performance? In this study privatized and public firms were compared during 3 years before and after privatization process from 1994 -2007. Approach: To achieve the purpose of the study, the pre-test and post-test design was used. It included two experimental groups and one control group. Results: The results of comparing performance before and after privatization in these firms indicated significant relationship between privatization process and financial performance indices debt-asset ratio, return on total asset, return on equity, return on sale, operating income-sale ratio, gross profit margin, earning per share. Besides, comparing the performance of privatized and public companies showed a significant difference only in EPS (p = 0.026), while there is no significant relationship between privatization and other variables. Conclusion: These results indicated that by passing the transformation stage in the type of ownership in companies, privatized companies have more significance increase in the index EPS in comparison with government companies.