Investigating the efficiency of companies in order to evaluate the effect of ownership transfer to the private sector

Dissertation for receiving the master degree "M.S"

Accounting

Abstract

One of the topics that has attracted the attention of many economists today is the issue of transferring the shares of government institutions to the private sector. There are debates and disagreements among economists and researchers about the efficiency and effectiveness of some companies in the private sector. One of the main objectives of privatization has been mentioned as increasing the efficiency of state-owned enterprises, but the experience of privatization has not been proven as a suitable solution for solving government problems and economic progress. In this research, an attempt has been made to evaluate the success of privatization by measuring the efficiency of companies.  For this purpose, the profitability returns, which are among the criteria of interest to the users of financial statements, have been tested at different times, and in this regard, 35 companies from among the companies accepted in the Tehran Stock Exchange, which operate in the private sector, have been examined in the period from 1386 to 1392. This research includes the independent variables of privatization and the percentage of privatization; In order to compare the items of profitability returns before and after privatization, the t-test with paired samples was used, and the independent sample t-test was used to measure the different levels of transfer in the form of specific percentages. According to the analysis done for the research variables, it was found that there is a significant difference between the sales efficiency of companies before and after privatization. There is a significant difference between the return on assets of companies before and after privatization. There is a significant difference between the return on equity of companies before and after privatization. The analysis made regarding the different levels of handing over resulted that the high percentage of privatization does not affect the sales yield. A high percentage of privatization has an effect on asset returns. The high percentage of privatization affects the return on equity. Key words: privatization, return on sales, return on assets, return on equity.

Chapter One

General Research

1-1: Introduction

Privatization is a set of actions in which different levels of control, ownership and management are transferred from the public sector to the private sector. The limits and methods of interference in the economy have always been the subject of many economists' debates. Although the belief of classical economists such as Adam Smith [1], David Ricardo [2], Jean-Baptiste C[3] and... was not a complete negation of the role of governments, it can be said that their belief was that the government's intervention was very limited. (Bakhshizadeh and Mashidi, Dunyai Ekhtaz newspaper).

Researches show that in terms of growth, private companies in competitive industries are much more efficient than government companies. Many policy variables such as: financial discipline, prices and trade liberalization, elimination of redundant regulations, privatization and clarification of property rights are important to determine the rate of growth. Paying attention to each of these things separately may have a limited effect on the rate of growth, but in general, they are strongly related to rapid development (Ashrafi) [4].

In this research, we try to measure whether the advancement of this process can be a solution in the development of the economy or not?

1-2: Statement of the problem

One of the controversial issues that has attracted the attention of many economists these days is the issue of part handover. It is from the activities of government agencies to the private sector. Due to the broad level of the government's duties, it is not possible to apply accurate and effective control over all sectors, when the government tries to take over all the affairs alone, it causes shortcomings and inefficiencies in the economy. Therefore, entering the private sector in order to advance part of the government's goals can be considered an effective solution. In this research, an attempt is made to investigate whether the entry of the private sector has been successful in fulfilling this goal, or has not had an impact on improving the conditions, or perhaps has not yet reached the stage of implementation that was predicted.

One of the important reasons for turning to privatization can be mentioned is the improvement of efficiency, financial performance and efficiency of companies. Due to the broad level of the government's duties, it is not possible to apply accurate and effective control over all departments.. The objectives of privatization can be deduced from the same shortcomings and inadequacies in the performance of state-owned companies. The purpose of this research is to evaluate the effect of transfer of ownership to the private sector, by examining the returns of companies admitted to the Tehran Stock Exchange in the period between 1386 and 1392. In developed countries, the implementation of this policy has met with success, while the results of most of the researches conducted in Iran indicate the failure of this policy in the first (1368) and second (1374) development plans, and the lack of a suitable financial market and lack of development can be stated among the reasons for the failure of this policy. Privatization in different countries can pursue different goals according to economic plans, but in any case, the common goal of all countries is to advance the economy towards being as efficient as possible. In the studies that have been done in different countries about privatization, most countries have been successful that have a suitable combination of public, cooperative and private sectors. Due to the broad level of the government's duties, it is not possible to apply strict and effective control over all sectors, therefore, it is not far off to expect inefficiency, inflation and budget deficit. In order not to face such problems and to improve efficiency and productivity, to expand the field of competition, to reduce their financial burden, to develop domestic capital markets and people's participation, governments engage in privatization. In most of the privatization options, in determining the performance of companies after privatization, it is important to be more profitable, higher efficiency and financially healthy.

In this research, we try to examine the sales return, return on assets, and return on equity of companies that operate in the private sector in the three years before and after the transfer of ownership in order to measure their performance and to show the degree of success or failure of this policy in these companies. The different levels of handover after privatization should be compared in order to measure the relationship between the level of success and the level of handover.

This information has been collected from the audited financial statements of the companies handed over to the private sector available on the Tehran Stock Exchange website.

The weakening of the government's role in economic activities and handing over part of these tasks to the private sector does not mean that the government will be completely removed from interfering in the implementation of all affairs, the government will continue its duty as a supervisor. Even in cases where the private sector alone is not able to fully perform an economic activity, it benefits from the government's support. Of course, in some cases, the private sector is able to perform its activities in the best way without the need of the government.  The general purpose of this research is to investigate whether privatization can be effective in advancing the goals of the country's economy and take a step forward or not.

This research includes two independent variables, one quantitative and the other qualitative, the effect of each of which will be examined separately on the dependent variables. has been assigned to the private sector.

Dependent variables:

1. Sales efficiency: [5] Sales efficiency or net profit margin is obtained by dividing net profit by sales. This ratio expresses the profit of each sales rial and expresses the percentage of net profit to sales.

To calculate sales efficiency, we need net profit[6] and sales. The formula for calculating it is as follows.  Return on assets[8]: It is obtained by dividing the net profit by the total assets[9] and it represents the profit obtained per rial of the company's assets. To calculate the return on assets, we need net profit and total assets. The formula for calculating it is as follows. Return on equity[10]: It shows the company's ability to earn profit from the resources that the shareholders have provided to the company. To calculate the return on equity, we need net profit and average equity[11]. The formula for calculating it is as follows.