| The economy of Arab Republic of Egypt (hereafter, Egypt) had been centrally-planned for more than three decades. After Years of deteriorating economic performance, the Government of Egypt (GOE) recently elected to sell state-owned enterprises. The rationale offered was market forces would improve the efficiency of the Egyptian economy, reduce government debt, and encourage private-sector participation in the economy.; This dissertation models the privatization process via an extensive form game clarifying the principal-agent relationship between the government and managers of state owned enterprises. This extensive form game shows it possible for the government to induce high work effort from directors of holding companies.; An empirical analysis is then performed measuring the impact of privatization on firm performance. It is found that privatization has moderate effects on firms being privatized in Egypt. There is modest evidence profitability increases due to privatization. However, privatized firms are definitely operated more efficiently than those remaining state owned. This increase in efficiency does not come at the expense of labor, but rather increased output. Also, the privatized firms are operating differently in that they are taking advantage of new financing opportunities as can be seen by decreased levels of debt ratios. Finally, contrary to expectations, privatized firms are not increasing capital spending relative to state owned enterprises. |
