Privatization and firm performance: The case of Libya

This study specially addresses the economic aspects of the privatization programme in Libya. The main objectives of this study are to explore the effectiveness of the privatization programme in the industrial companies; to evaluate the privatization effects on firm performance in the industrial companies; and to identify the important obstacles that hinder the privatization programme. The firms’ performances were evaluated using both primary and secondary data analyses. Questionnaires were used to collect primary data. Secondary data were collected from the financial reports of the selected privatized firms for the period 2002-2010. Two econometric analyses; mean comparison and traditional panel models were employed in the empirical analysis. In the mean comparison analysis, the performances of state-owned enterprises were examined. For traditional panel analysis, the fixed effects model and the random effects model were employed to analyze the effect of the privatization programme on firm performances. Modelling of the traditional panel models
involved two dependent variables (operational efficiency and profitability level) and
six independent variables (productivity, ownership structure, employment, capital,
privatization and liquidity). The results of the field survey show that managers and
workers were in favour of the privatization programme and privatization in Libya has
faced minor difficulties. The results of the mean comparison analysis indicate a significant difference of mean values in pre-privatization and post-privatization. The mean values of profitability level, operating efficiency, capital, ownership structure and productivity in the post-privatization are higher than in pre-privatization. The mean value of employment in post-privatization is lower than in pre-privatization. The results of panel analysis show that privatization and employment have positive and significant effects on operational efficiency and the profitability level of privatized firms; ownership structure has significantly improved privatized firms’
efficiency, but has no effect on profitability level; and liquidity has no statistically
significant effect on privatized firm’s operating efficiency and profitability level. The privatization programme in Libya has improved the performance and the working
conditions of privatized firms