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Research Questions

The case study was used to analyze the major determinants in the price of a company during privatization (Arin and Cagla 1393–404). The important questions for the case study include:

  1. Can the size of the company affect the price during privatization?
  2. How does the market structure affect the price of a firm?
  3. What does a marketer learn from the privatization process?
  4. Can the cost and profit margin affect the price of a firm?

The case study uses sample variables to answer the above questions.

Previous Literature

The objective of privatization is revenue generation. The process becomes difficult when some factors are not considered before privatization. Previous pieces of literature have been published on this topic, thus adding an insight into the subject matter. Megginson and Netter analyzed the privatization process and produced the following conclusion: That aside from the revenue generated, privatization affects the efficiency of the firm.

Another author named Haung emphasized that the initial public offering or initial returns of a firm is not significant after being privatized. Lopez-De-Silanes discovered that the higher the number of bidders for a firm the higher the revenue generated during privatization. Lopez explained that the low-profit return of some companies contributed to the low income generated during privatization. The author, however, stressed that the price of a firm depends on the net income generated by the organization.


The case study was used to analyze the determinants of privatization prices in Turkey (Arin and Cagla 1393–404). The samples were privatized between 1989 and 1998. The samples were reduced because some lacked data on profits. The samples selected comprised 68 firms. These samples consist of six industries. 24 firms were cement plants while some were dairy products firms, airport services, manufacturing industries, marinas, and ports.


The sample consists of 24 cement companies, 29 dairy products plants, 3 marinas, 4 ports, 2 airlines, and six heavy industries.

Out of the 68 samples, 65 firms were privatized through block sales while 3 firms were privatized through a combination of public offerings and block sales. The case study used regression analysis to determine the most significant determinant to privatization prices. This was carried out in the first set of regression. The dependent variable used for the case study is the raw privatization price of the firm.

The raw privatization price of the firm variable was corrected for inflation using CPI statistics. The second set of the regression analysis used the sales-adjusted price as the dependent variable. The sales-adjusted price variable was calculated by dividing the revenue before privatization by the percentage of shares privatized. The objective of the regression analysis was to analyze the differences in the firm’s efficiencies and level of profit.


The survey showed that the number of sales before privatization was the major determinant of privatization prices. This is because the number of sales has a positive and significant effect on the privatization price. The net profit and capacity ratio was insignificant. The number of workers did not affect the privatization price. The findings show that buyers considered the revenue generated by the firm. In the second set of regression, the results show that production level, growth rate, and proportion of the privatized firm were significant and positive determinants of privatization price. Government restructuring was insignificant while the number of bidders is positive and significant.

The case study reveals that the size of the company is not a determinant for the privatization price. The findings showed that the market structure will not affect the price of the privatization price. Government restructuring before privatization is a waste of resources. The buyer considers the revenue generated by the firm. Lastly, the cost and profit margin are insignificant and cannot determine the privatization prices.

Robustness checks

  1. The sample study centers on single firms, such as cement plants. The reason is that inter-industry have unobserved heterogeneity.
  2. The samples used were only privatized cement plants.
  3. The privatized cement plants provided accurate data for the study.
  4. Turkey is the largest cement producer in Europe.


From the study, it is evident that revenue affects the privatization prices while government restructuring before privatization is a wasteful investment. Consequently, the profit margin is significant and positive in determining the privatization prices.

Work cited

Arin, Kerim Peren, and Cagla Okten. “The Determinants of Privatization Prices: Evidence from Turkey.” Applied Economics, vol. 35, no. 12, 2003, pp. 1393–404. Crossref. Web.

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