The Impact of privatisation of state owned enterprises on financial performance. The case of Agribank

Author

Isa, Mitchel N.

Title

The Impact of privatisation of state owned enterprises on financial performance. The case of Agribank

Abstract

The aim of this study was to investigate the effect of privatisation on business financial performance in the case of Agribank Zimbabwe. The data for the study was obtained from secondary sources; specifically, handbook from the Zimbabwe Securities Exchange, Agribank’s website, The Banker Database as well as published annual reports and financial statements of the bank. Data was collected for the six years which is three years before and three years after privatisation including year zero(2015) in which the bank was privatized. To test my predictions, i followed the techniques of Mwangi (2014) in order to determine post privatization performance changes. The researcher calculated the mean value of each variable for each firm over the pre and post privatization periods, we then used the T- test as principal method of testing for significant changes in the variables. More than 98% of the indicators were inline with he study’s expectation. Only one of the indicators of leverage shown an increase instead of a decline in Debt to Equity ratio after privatization. Profitability ratios improved significantly after privatisation, as well as capital investment, dividend payout, earnings per share and efficiency. Employment decreased which was in line with the expectations of the study that after privatisation the number of employees should decrease. The findings of this study indicated that while some financial performance measures, including leverage, showed conflicting effects of privatization, the majority of them significantly improved following privatization. For the three years before to its privatization, Agribank operated at a net loss; however, this rapidly reversed after privatization. As a result, this study suggests that the Government of Zimbabwe privatize under performing public companies in order to raise their performance. The best privatization strategy is partial privatization, which will let the government keep some ownership of the company.

Date

2023

Publisher

BUSE

Keywords

Privatization

State owned enterprises

Financial performance

Supervisor

N/A