Divestment of state-owned shares and firm performance

Abstract

In Vietnam, the privatization of state-owned enterprises (SOEs) through equitization has been in progress since 1992. Despite such efforts, state-owned shares remain high in most of the equitized SOEs. Thus, the national government of Vietnam started to pursue the divestment of state ownership in equitized SOEs for the purpose of genuine privatization. This paper focuses on identifying the effect of divestment of state ownership on the performance of enterprises. For a more detailed analysis, performance is classified into profitability and financial stability. This research reviewed the ownership structure change of 740 listed companies in Vietnam from 2001 to 2017, and chose 58 companies that experienced significant divestment of state-owned shares for sample. I calculated the relative performance of selected firms to the market average for both pre- and post-divestment periods. Comparison of the data from these two phases showed that divestment in state-owned shares does not contribute the statistically significant improvement on the performance of enterprises.