The effect of privatization on financial performance of state owned enterprises (A Case Study of Formerly State-owned Enterprises Listed at Nairobi Stock Exchange)

Abstract

The analysis of the impact of privatization on financial performance of privatized enterprises in Kenya is important since there are high expectations placed upon privatization, by policy makers and the public at large, to improve enterprise performance and achieve macroeconomic stabilization. In view of this the main purpose of this study was to illustrate, using empirical evidence, the extent to which the privatization programs adopted by Government of Kenya had an impact on the financial performance of privatized enterprises as was anticipated by the policy makers. The main aim of the study was to establish the effect of privatization on financial performance of state owned enterprises. To answer the question the paper considers a large set of privatized enterprises in different sectors which experienced privatization over the period from three years. The specific objectives of the study were; to establish the effect of privatization on profitability of privatized state-owned enterprises in Kenya, to determine the effect of privatization on liquidity of privatized state-owned enterprises in Kenya and to determine the effect of privatization on working capital of privatized state-owned enterprises in Kenya. The study took the six former state owned enterprises already listed in Nairobi Stock Market. The study used the financial reports of the firms before and after privatization as the secondary data to address these objectives. The key variables of the study were the firms' profitability, liquidity and working capital. The study established that privatization generally improved the firms' profitability, liquidity and working capital which are the main indicators of financial performance. The analysis of the impact of privatization on financial performance of privatized enterprises in Kenya is important since there are high expectations placed upon privatization, by policy makers and the public at large, to improve enterprise performance and achieve macroeconomic stabilization. In view of this the main purpose of this study was to illustrate, using empirical evidence, the extent to which the privatization programs adopted by Government of Kenya had an impact on the financial performance of privatized enterprises as was anticipated by the policy makers. The main aim of the study was to establish the effect of privatization on financial performance of state owned enterprises. To answer the question the paper considers a large set of privatized enterprises in different sectors which experienced privatization over the period from three years. The specific objectives of the study were; to establish the effect of privatization on profitability of privatized state-owned enterprises in Kenya, to determine the effect of privatization on liquidity of privatized state-owned enterprises in Kenya and to determine the effect of privatization on working capital of privatized state-owned enterprises in Kenya. The study took the six former state owned enterprises already listed in Nairobi Stock Market. The study used the financial reports of the firms before and after privatization as the secondary data to address these objectives. The key variables of the study were the firms' profitability, liquidity and working capital. The study established that privatization generally improved the firms' profitability, liquidity and working capital which are the main indicators of financial performance. The analysis of the impact of privatization on financial performance of privatized enterprises in Kenya is important since there are high expectations placed upon privatization, by policy makers and the public at large, to improve enterprise performance and achieve macroeconomic stabilization. In view of this the main purpose of this study was to illustrate, using empirical evidence, the extent to which the privatization programs adopted by Government of Kenya had an impact on the financial performance of privatized enterprises as was anticipated by the policy makers. The main aim of the study was to establish the effect of privatization on financial performance of state owned enterprises. To answer the question the paper considers a large set of privatized enterprises in different sectors which experienced privatization over the period from three years. The specific objectives of the study were; to establish the effect of privatization on profitability of privatized state-owned enterprises in Kenya, to determine the effect of privatization on liquidity of privatized state-owned enterprises in Kenya and to determine the effect of privatization on working capital of privatized state-owned enterprises in Kenya. The study took the six former state owned enterprises already listed in Nairobi Stock Market. The study used the financial reports of the firms before and after privatization as the secondary data to address these objectives. The key variables of the study were the firms' profitability, liquidity and working capital. The study established that privatization generally improved the firms' profitability, liquidity and working capital which are the main indicators of financial performance.