The privatization efforts of mostdeveloping countries are inhibited by embryonic financialmarkets, weak regulatory capacity, and a public sector thataccounts for a large share of GDP. Many, particularly thosewith low per capita income, lack some of the mainingredients for a successful privatization, such as capital,entrepreneurs, and competent managers. But some of thesecountries have large markets and fast economic growth rates,features that make the success of government divestituremore likely. This Note describes the results of a study thatset out to determine whether privatization is beneficial inthe economic environments and institutional settings ofthese countries by examining how privatization affectsfirms' financial and operating performance in a broadset of developing countries.
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