Is the improved financial performance after broader reforms and privatisation long-lasting and uniform across industries?

The long-run financial performance of industries after broad reforms, including privatisation, has rarely been investigated. This study addresses this issue and examines the financial and operational performance within the Pakistani cement industry by utilising data covering two decades of the post-reform period. The study then compares the findings against four other industries from the manufacturing sector. Our empirical estimates reveal that, similar to the findings of many early studies, privatised firms improved their profitability, capacity utilisation, liquidity, solvency and leverage indicators in the short run, but recorded either a statistically significant decline or at best no change in profitability, financial prudence and capital investment over a longer post–reform and privatisation period. The long-run decline in profitability was also widespread across the other comparable industries. Interestingly, the improvement in liquidity and solvency indicators for privatised firms was better than for firms that had always been private in the immediate period but only lasted briefly. The one exception is labour use efficiency in terms of sales/income per employee and real sales, which indeed significantly improved over the longer post-reform/privatisation period. However, this improvement is mostly limited to the cement industry when compared against four other industries in the Pakistani manufacturing sector.