Pre- and Post-Disinvestment Performance Evaluation of State-Owned Utility Sector Enterprises in India

The Way Forward

Abstract

The consensus in recent times is that state-owned firms are not as profitable as their private counterparts. Therefore, disinvestment policies are put in place to decrease the government's involvement in the economy and encourage private sector participation to increase the performance of firms. The present study examines the profitability, financial performance, and operating performances of state-owned utility sector firms in India that were successively disinvested through public offering mode from 2011 to 2020. Using a sample of the top ten utility sector firms listed in the National Stock Exchange, in 2023, the firm performance is assessed through a range of financial ratios, including return on equity return on sales, return on assets, sales efficiency, net income efficiency, and leverage. The Wilcoxon rank test compares the firms' before and after disinvestment performance.

Panel data techniques have been used to evaluate the impact of disinvestment on performance indicators. The findings show a significant enhancement in the financial performance of the sample firms, while there is an insignificant change in profitability and operating performance. The current study provides new empirical findings on how ownership reforms through disinvestment have affected the performance of state-owned utility sector firms in India.