International Journal of Public Sector Management

Purpose – This paper aims to examine whether the mode of privatisation and the subsequent ownership structure affects post-privatisation performance.

Design/methodology/approach – Utilising a theoretically derived sample of two matched telecommunications firms in New Zealand and Australia, and non-parametric analysis of financial data, the performance of two forms of privatisation are compared: full privatisation via direct sale to foreign anchor investors versus partial privatisation via a domestic share issue restricting foreign ownership.

Findings – Concentrated ownership through direct sales to foreign owned anchor investors is not more efficient or profitable, nor does it result in increased capital investment; it does, however, result in higher dividend payouts.

Research limitations/implications – These findings contradict the accepted wisdom and dominant theory in the field that full privatisation outperforms partial privatisation, and that FDI transfers firm-specific ownership advantages enabling the recipient to outperform domestically owned firms. However, the findings are applicable to the two firms and countries studied and future studies need to extend these to the wider population of privatised firms.

Practical implications – While privatisation will improve organisational performance, the choice of whether to privatise by direct sale to anchor investors and foreign owners versus a partial share issue privatisation and keeping a domestic focus will have post-privatisation performance implications.

Originality/value – A more nuanced understanding is provided of the performance implications of modes of divestiture and ownership structures in advanced economies.