Operation of privatized Icelandic firms

Abstract

The question whether private or public ownership benefits society more, surfaces regularly. The financial collapse in the autumn of 2008 has re-vitalized the debate. Whether state ownership is more appropriate than private should be analyzed in the light of the outcome of prior privatizations. This paper analyzes changes in the operations of Icelandic privatized firms during the privatization period 1992-2005. The quality of the privatization process conducted during this period has been questioned, especially regarding the privatization of the Icelandic public banks. This paper does not concentrate on these processes but the changes in the operation of the privatized firms, based on analysis of 12 operational measures. The empirical research suggests that privatization did not lead to improvements of the divested SOEs in Iceland as their operations were equally efficient, even before privatization. Nevertheless, control groups of private firms perform better in the wake of the privatization.