Amir Shams Kolookhi Young Researchers and Elite Club, Torbat-e-Jam Branch, Islamic Azad University, Torbat-e- Jam, Iran Aliakbar Nazari Department of Accounting, Torbat-e-Jam Branch, Islamic Azad University, Torbat-e-Jam, Iran Hossein Parsian Young Researchers and Elite Club, Torbat-e-Jam Branch, Islamic Azad University, Torbat-e- Jam, Iran
The Effects of Targeted subsidies Public Firms on Their Performance in Tehran Stock Exchange
Abstract:
This study aims to examine the effects of Targeted subsidies public firms on their performance in Tehran Stock Exchange. The hypotheses of this paper examine the significance of the relationship between Targeted subsidies, asset return, stockholders equity, and stock return. To test research hypotheses, the method of comparing samples means and their analysis were used. The statistical sample included 71 companies. The findings showed no significant correlation between asset return, stockholders equity, stock return, and Targeted subsidies. Among the hypotheses of 3 periods, the hypothesis of one period was confirmed.
SCIENCE ROAD JOURNAL Corresponding Author: Amir Shams Kolookhi Email: Shams1122@gmail.com Acceptance Date: 7/29/2014 89 1. Introduction Targeted of subsidies is an ideal test for showing political commitment toward market-centered modifications. Such tests are concerned with policy-makers drawback from managing and supervising economic activities. Investigating the role of transform forms in increasing the efficiency and productivity of delivered units is an important issue in the pathology of Targeted subsidies processes. This transfer or delivery of control authorities from politicians to private owners is a main reason of improving companies' performances under private ownership. Although Targeted subsidies can help market-centered modifications and empowers political forces, the government cant fully prevent from political changes (1).Judgments on the results of Targeted subsidies need a background understanding about its goals and a general definition of it. Targeted of subsidies has various definitions. It can have a meaning other than full transfer of ownership from public to private section. In a broader term, Targeted subsidies refers to a range of the policies which govern the capital of private section from outsourcing to full market liberalization in developing an industry (2).Some of the given definitions are as follows: Targeted subsidies is a tool for improving the performance of economic activities of the industries via increasing the role of market force in case at least 50% of public stocks are delivered to private section (3). Schwartz asserts that Targeted of subsidies refers to a new economic system based on the market and revolutions of different economic aspects (4). Targeted of subsidies is a set of legal, economic, social operations, based on decreasing organizational bureaucracy (5). It is a process in which the government examines the possibility of transferring the duties and utilities to the private section and delivers them if the conditions are proper (6). Targeted subsidies can have different goals such as ownership transfer and decreasing the direct government role in economic activities, deregulations, subsidiary and price disorders balance, budget reduction, capital market development, competition increases, and efficiency improvements, creating interest in the employees of the firms, and providing customers benefits (4).The progresses in Targeted subsidies have not been fully fulfilled for the problems such as instability of national economy, political ambiguities about Targeted subsidies, disagreements of strong stakeholders, organizational complexities, managerial deficiencies in the market, heavy taxes, and public jealousy to private entrepreneurs (7). According to Denial et al. (2009), the advantages of stock markets liberalization are as follows: - Sharing the risks between internal and external agencies, it reduces ownership capital cost - Liberalization of capital account has positive effects on investments. - International standard models of asset pricing predict that stock market liberalization can decrease ownership capital costs Increasing input capital trend can enhance the cash ability of stock market which decreases capital spending. However, liberalization of capital market doesnt decrease ownership capital costs. Although liberalization decreases capital spending without any ambiguity, it can also lead to increasing without-risk return rate and capital cost (8). Various studies have been done on Targeted subsidies. But, there is no definite result for Targeted subsidies effects. The results of Targeted subsidies can be either positive or negative (9, 10, 11, 12). Studies on Targeted subsidies are divided into 2 general groups; econometric studies which try to identify the results of Targeted subsidies, its strength and weakness, using corporate data or a collection of international data, and the studies on the processes, factors, regulations, demand and supply conditions, and etc.
SCIENCE ROAD JOURNAL Corresponding Author: Amir Shams Kolookhi Email: Shams1122@gmail.com Acceptance Date: 7/29/2014 90 2. Hypotheses H1. Targeted subsidies of public firm's increases return of assets (ROA) in the first and second 3 years after delivery compared to 3 years before delivery. H2. Targeted subsidies of public firm's increases return of equity (ROE) in the first and second 3 years after delivery compared to 3 years before delivery. H3. Targeted subsidies of public firm's increases return of stocks(R) in the first and second 3 years after delivery compared to 3 years before delivery.
3. Methodology The statistical population of the study included all the firms of Tehran Stock Exchange, delivered to the public section from 2004-2006. Since the study examines the firms, 6 years after transfer, the time span of the study is 2006-2012.
3.1. Statistical methods To test the hypotheses, the means of the samples were calculated and analyzed. It means that the gathered data of selected indices in 2 groups before and after Targeted subsidies were compared.
3.1.1. H1 test Testing H1, the null hypothesis asserts that there is no significant difference between the mean of ROA in the first and second 3 years after delivery, compared to 3 years before delivery after Targeted subsidies. H 0 : 1 = 2
But H1 suggests that there is a significant correlation between them. H 1 : 1
2
AcceptingH 1 implies that if such difference is positive, Targeted of subsidies has positive effects on ROA. But, if the difference is negative, Targeted of subsidies doesnt have any positive effects.
3.1.2. H2 test Testing H2, the null hypothesis asserts that there is no significant difference between the mean of ROE in the first and second 3 years after delivery compared to 3 years before delivery after Targeted subsidies. H 0 : 1 = 2
But H2 suggests that there is a significant correlation between them. SCIENCE ROAD JOURNAL Corresponding Author: Amir Shams Kolookhi Email: Shams1122@gmail.com Acceptance Date: 7/29/2014 91 H 1 : 1
2
AcceptingH 1 implies that if such difference is positive, Targeted of subsidies has positive effects on ROE. But, if the difference is negative, Targeted of subsidies doesnt have any positive effects.
3.1.3. H3 test Testing H3, the null hypothesis asserts that there is no significant difference between the mean of R in the first and second 3 years after delivery compared to 3 years before delivery after Targeted subsidies. H 0 : 1 = 2
But H3 suggests that there is a significant correlation between them. H 1 : 1
2
Accepting H 1 implies that if such difference is positive, Targeted of subsidies has positive effects on R. But, if the difference is negative, Targeted of subsidies doesnt have any positive effects.
4. Results To examine the firms performance, 3 measures of assets return, equity return, and stock return were used. The summary of H1 test results are shown in Table 1.
Table 1-Summary of H1 test results H1
1st period after Targeted subsidies
2nd period after Targeted subsidies Sig Result Sig Result companies in 2002
.173 Rejected .070 Rejected companies in 2003
.028 Confirmed .002 Confirmed companies in 2004
.069 Rejected .038 Confirmed SCIENCE ROAD JOURNAL Corresponding Author: Amir Shams Kolookhi Email: Shams1122@gmail.com Acceptance Date: 7/29/2014 92 The summary of H2 test results are shown in Table 2. Table 2-Summary of H2 test results H2 1st Period After Targeted subsidies
2nd Period After Targeted subsidies Sig Result Sig Result companies in 2002
.301 Rejected .118 Rejected companies in 2003
.008 Confirmed .025 Confirmed companies in 2004
.059 Rejected .523 Rejected The summary of H3 test results are shown in Table 3.
Table 3-Summary of H3 test results H3 1st period after Targeted subsidies
2nd period after Targeted subsidies Sig Result Sig Result companies in 2002
.240 Result .149 Rejected companies in 2003
.014 Rejected .016 Confirmed companies in 2004
.506 Confirmed .100 Rejected
Regarding the above tables, it is observed that Targeted subsidies rules have been considered more carefully in 2003, fulfilling the expected goals from it. But, such strict rules have rarely been exerted in 2002 and 2004.
SCIENCE ROAD JOURNAL Corresponding Author: Amir Shams Kolookhi Email: Shams1122@gmail.com Acceptance Date: 7/29/2014 93 5. Conclusion Nowadays, Targeted of subsidies is considered as a proper way of increasing efficiency in the economy of all nations, especially developing countries. But, the guarantying point for reaching growth is its consideration of strategic goals based on the conditions of each country. Recognizing strength and weakness of the economy and providing necessary rules for reaching growth is the necessity of this issue. According to the institution a lists, fundamental problems should be solved because the actions such as reducing government responsibilities, deregulations, liberalization, and etc are necessary. They can necessarily lead to the improvement of economic performance of the country. In the present world, the opportunities and success of the people, companies, nations, and governments depend on the ways of their performance in the society. Accordingly, an autonomous order is needed to enable market mechanisms to work. This study examines the effects of Targeted subsidies on the performance of the companies. The results showed that despite the studies of many countries, Targeted subsidies hasnt led to the efficiency improvements in stock exchange, except in a limited time period in Iran. The findings of this study agree with the results of previous domestic studies.
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[3] Beesly, M .,Littlechild, S (1994), "Privatization, Principles, Problems and Priorities in: Privatization and Economic Performance", Oxford University Press, 15-30. [4] Motavasseli, M(1994), "Privatization or Desired Combination of Market", Institute of Commercial Researches and Studies Press (In Persian). [5] Shams, A (1992), "Is the Privatization of State Owned Institutes a Necessity or Compulsion?" Quarterly Journal of Administration Management.No. 17,42. (in Persian) [6] Saghir, J (1993), "Private Sector Development and Privatization", The Report Presented for the Seminar of Privatization Survey, Economical Affairs Faculty, and Economic Development Institute, May 8-13 (In Persian). [7] Akbariyeh, H.,Dordaneh, D (2003), "Privatization Management", Ariana Industrial Research Center, Dorsa Managerial Consulting Company, Athena Press (in Persian). [8] Cajueiro Daniel, O.,PerikilisGand Benjamin, M. T(2009) "Does Financial Market Liberalization Increase the Degree of Market Efficiency? The Case of the Athens Stock Exchange", International Review of Financial Analysis. [9] Havrylyshyn, O., McGettigan, D. (1999), "Privatization in Transition Countries: A Sampling of the Literature", IMF Working Paper. No. WP/99/6. [10] Shirley M., and P. Walsh (2000), "Public Private Ownership: The Current State of the Debate", World Bank Working Paper, No. 2420. SCIENCE ROAD JOURNAL Corresponding Author: Amir Shams Kolookhi Email: Shams1122@gmail.com Acceptance Date: 7/29/2014 94 [11] Narimani, M (2001), "Outcomes and Obstacles of Privatization in Iranian Power Repair Companies", Unpublished M.A. Dissertation, Islamic Azad University of Tabriz, Tabriz (In Persian). [12] Almasi, M.R (2002), "The Impact of Privatization on the Financial Performance of Companies Accepted in Tehran Stock Exchange", Unpublished M.A. Dissertation, University of Shiraz, Shiraz(in Persian)
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