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Title Corporate value creation, governance and privatisation: restructuring and managing enterprises in transition: the case of Eritrea
Full text http://irs.ub.rug.nl/ppn/218222882
Date 2001
Author(s) Hailemariam, Stifanos
Abstract One of the economic aims of privatisation is improving the efficiency of existing state-owned enterprises while protecting their value. This research evidenced that the longer the time of implementation of the privatisation process, the higher the value that can be destroyed in state-owned enterprises to be privatised. During the privatisation process agency problems between management and the state as an owner increases. The managers are uncertain about their future and the state also increases its control mechanisms on companies to be privatised. The state restricts the authority of managers in operations, investment and financing and governance. These restrictions reduce the management's decision-making empowerment and destroy the value creation potential of the enterprises. Moreover, the saleability of the large stateowned enterprises in poor developing countries is constrained by a lack of potentialbuyers and capital markets. Therefore, privatising state-owned enterprises in poor developing countries is more difficult in comparison to the privatisation of stateowned enterprises in the developed countries. The increase in agency problems during privatisation and the constraints encountered in selling state-owned enterprises in poor developing countries result in a 'privatisation trap'.This study documents theoretical and policy implication of the study and the implications of the research to the conceptual framework (model). The debate on the speed of privatisation is centred on the 'Big Bang' approach that is divesting stateowned enterprises as rapidly as possible and the 'Gradualist' approach, that is slow privatisation. This study evidences that reforms prior to the announcement of sale improve the value created in enterprises, while once companies are offered for sale quick divestiture is best. Moreover, the debate on the sequencing of privatisation and restructuring is focussed on whether governments should restructure state-owned enterprises prior to sale. This study shows that judgement has to be exercised. The cases studied revealed that selective restructuring and nurturing the value creation potential is essential. In addition another debate on privatisation is whether stateowned enterprises adjust to the market environment. The case study of Eritrea provides mixed evidence that some enterprises in the food processing, beverage and footwear and leather industries adjust to the market environment, while all the textile enterprises are encountering difficulties in adjusting to the market environment. In order to transform the state-owned enterprises in Eritrea into value creating private entities there is a need of changing ownership, finding new markets, reducing material costs, investing in new machinery and upgrading of technology, access to finance, empowering and controlling managers and training management and employees.
Subject(s) Staatsbedrijven; Privatisering; Eritrea; Proefschriften (vorm)
Language en_US
Publisher University of Groningen
Type of publication Dissertation
Format text/html; application/pdf
Rights University of Groningen
Repository Groningen - University of Groningen
Added to C-A: 2008-12-22;03:17:50