Privatization and Firm Performance: An Empirical Study of Selected Privatized Firms in Nigeria

Abstract

The aim of this study is to investigate the financial and operational efficiency of the privatized firms in Nigeria. Data for
this study comes from secondary sources; specifically, Fact Book from the Nigerian Stock Exchange, Offer Prospectuses, as
well as published annual reports and financial statements of the privatized firms. Our sampled firms are drawn from
manufacturing, oil marketing, banking and insurance sub-sectors of the Nigerian economy. The period of analysis covers 5 years
before, and 5 years after privatization. To test our predictions, we follow the techniques of Megginson et al. (1994) in order to
determine post privatization performance changes. We calculate the mean value of each variable for each firm over the pre and
post privatization periods, we then use the T- test and the Wilcoxon sign rank test as principal methods of testing for significant
changes in the variables. Results obtained from this study are mixed. Whereas some companies in our sample show
improvements in some indicators, other companies have shown decline in some indicators after privatization. However, in spite
the mixed results, the overall picture shows improvement in profitability for at least half of the firms in our sample. Overall, we
may conclude that our results provide little evidence that privatization has caused significant improvement by all indicators.