Investigating the effect of privatization of state-owned companies on their added economic value

Dissertation for Master's Degree

Orientation: Accounting

Abstract:

One of the most important matters for the stakeholders of the company such as the government, investors, lenders and managers is to evaluate the performance of companies to make decisions using the results of this evaluation. In order to evaluate the performance of managers, four approaches are used

1. Financial approach such as stock returns, additional stock returns

2. A consolidated approach such as the ratio of price to profit per share

3. Accounting approach such as profit per share, return on investment, rate of return on equity and accounting rate of return

4. Economic approach such as economic added value, refined economic added value

In this research, the effects of the government's privatization policy have been examined from a financial perspective and using an economic approach in performance evaluation. That is, by using the ratio of economic added value, the efficiency and financial performance of privatized companies have been examined in three years before privatization and three years after privatization.

The main purpose of this research is whether the efficiency and profitability of companies that have been handed over to the private sector have changed or not? The average economic added value has not changed much before and after privatization.

Introduction:

Privatization is the concept of reducing government economic activities or limiting government intervention in economic affairs. In another definition, privatization means handing over government resources to the private sector (Mutosoli, 1373, p. 54) 1. Among the goals of privatization in Iran, based on the approvals of the government board in 1970-1971 and according to principles 134 and 138 of the Islamic Republic of Iran's Constitution, one can improve the efficiency of companies' activities and reduce the volume of government employment in unnecessary economic and service activities, as well as creating economic balance and optimal use of the country's facilities or to The meaning of "reducing government responsibilities and removing government resources from the scope of government management in order to improve efficiency and productivity in the use of these resources" was pointed out by Nasirzadeh in 1369.

In this research, we examine the effect of privatization of state-owned companies on their efficiency and financial performance through economic added value, and it is hoped that the results of this research will be a guide for future research.

Chapter One

Generalities of the research

1-1-Introduction:

In this chapter, first briefly, the generalities of the research, including the statement The problem, goals, and importance of the research and then the theoretical framework of the research and the analytical model of the research will be discussed.

In fact, in short, due to the importance of privatization and increasing the efficiency of companies, which is one of the objectives of the privatization policy, in this research we are looking to investigate the effects of privatization on the efficiency, productivity and value creation of companies after privatization. The research is to determine the success of companies subject to privatization after their handover. 2-1 Statement of the problem Considering the increase in the process of handing over state-owned companies to the private and cooperative sectors in recent years in accordance with the policies of Article 44 of the Constitution and the orders of the Supreme Leader regarding the acceleration of this policy, there is a need to determine the effects of this policy on the performance of companies as a follow-up to the goals mentioned in this policy, which is to increase the efficiency of the companies' activities.

Therefore, in order to determine the effects of this privatization policy as a whole, we can examine the profitability and efficiency of companies so that the performance of companies can be evaluated at least from an economic point of view.

Also, according to the research done in the past, both in Iran and in research outside of Iran, regarding the effects of privatization on efficiency measurement criteria and financial performance, such as stock returns (Talibnia and Mohammadzadeh Salteh, 1383), net profit, asset return ratios and equity returns (Bahramfar and Shaheswari, 1385) 2 and other common and traditional tools, and considering that the effects of this policy have not been investigated in terms of economic value added or EVA, which according to The research done in the past has confirmed its relative superiority over the so-called traditional and common tools of the past (Janani, Hatami, 2016). In this research, we are trying to measure the performance of companies' management through an economic approach, and as a result, we can study the results of privatization policy in terms of creating efficiency.

So we want to show whether privatization had a positive effect on EVA or not?

And whether EVA of companies before and after privatization Is there a significant difference?

Actually, in this research, privatization is the independent variable and EVA is the dependent variable.

3-1 Research History

In many countries, especially developing countries, state-owned companies have emerged as government tools in order to achieve optimal allocation of resources and achieve economic efficiency. However, the passage of time and the more complicated conditions of the economic environment and the serious emergence of the competition component in commercial activities caused the unfavorable performance of these companies to become evident, including the issue of their economic efficiency. Therefore, the allocation and handing over of public companies to the private sector took place in such a way that in the 1980s and early 1990s, the implementation of the privatization policy was chosen and implemented as one of the key policies to solve economic problems in developing countries (Mandal). , 1994, p. 45) 2.

England is one of the most prominent countries in the implementation of privatization policy and in fact it is the initiator of the privatization process and the conducted research indicates the successful implementation of this policy and the achievement of positive economic consequences for this country. After England, the wave of privatization spread to other developed countries, including Italy, France, and Germany.

Privatization policy was implemented in Iran since 1370 based on the provisions of Note 32 of the First Development Plan of the country. In the second and third economic development programs, the process of privatization is one of the government's goals and macroeconomic policies. The design and implementation of this policy is considered as an economic strategy and solution to solve the existing disorders in the country. After identifying the companies that can be transferred, although not completely, which was done during the years 1368 and 1369, some issues, including the methods of transfer and the ways of using the revenues obtained from it, were determined and the institutions in charge of the transfer were determined. In 1380, the government showed its serious determination to implement this policy and speed up and make it more efficient by establishing the Privatization Organization, which is administered by the Ministry of Economy and Finance.

It should be noted that according to the experiences of other countries, the privatization policy will be fully successful if it has long-term procedural stability and includes all activities that are somehow related to each other (Shams, 1372, p. 78) 1. 4-1 The importance and necessity of research The increase in the volume of activity and the number of state-owned companies due to the victory of the Islamic Revolution, which took place due to the change of ownership of many private companies and the inefficient and suboptimal waste and consumption of resources in state-owned companies, made the government aware that in order to improve the efficiency and increase the productivity of the country's material and human resources and make the government more efficient in the field of policy-making and capacity development The private and cooperative sectors should transfer and sell the shares of companies that can be transferred to the public sector and companies whose continuation in the public sector is unnecessary, according to the provisions of the Law of the Third Program of Economic Development of the country, to the private and cooperative sectors (Third Plan Law, p. 18)2.

On the other hand, the government, as the implementer of this policy, as well as the duty of accountability to other forces of the system and society, and in order to better plan and implement this policy in the future, is looking for the results of this policy. May the establishment of an organization called the Privatization Organization for the first time in the country in 1980 prove the importance of privatization for the government and other institutions.