Effects of Privatization of Iranian Listed Corporates on their Functions and Performance

Development of the private sector, running businesses by private sector enterprises and privatization of state-owned enterprises are a dominant approach in most countries. Ample empirical evidence has strongly supported the effectiveness of this approach. In Iran, 39 state-owned companies, whose market value is about 60% of the total value of the country’s stock market, joined the stock market between 2001 and 2015. There were two major objectives behind this move: improving the performance and functions of business enterprises. This paper attempts to identify and analyze the those factors which help privatization to affect the performance and functions of listed firms in Iran’s stock market. Findings indicate that privatization is effective in promoting nominal performance and nominal functions of firms, but it cannot lead to the development of their actual performance and business functions. Besides, findings show that the formation of corporate governance, dominant shareholderchr('39')s status after privatization, the way management controls the quality, and the way privatization affects performance and functional changes of firms each plays a role.