Privatization is the transferring of ownership from state to private ownership expecting that the lackluster and unsatisfactory performance of state-owned enterprises can be improved. This study was focuses on the evaluation of operating and financial performances of the privatized firms which issued shares in capital market. The research was carried out by investigating the performance of the firms after privatization, and evaluating the performance of initial public offerings (IPOs) on the short-run and the long-run. The performance were studied through statistical analysis of the dependency of several independent variables namely performance proxies i.e. soft budget constraint, fraction of share sold, share allocated to employee and top management team change on dependent variables i.e. return on sales (ROS), return on assets (ROA) and return on equity (ROE), real sale and net income. Several factors associated with the variation in initial returns such as percentage of share sold, uncertainty about the future firm value, market index fluctuation prior to the issue, size of firm and the value of issue on the first day of trading were analyzed statistically to evaluate the short-run and the long-run performances. The results showed that the performance proxies ROS, ROA and ROE deteriorated and real sales and net profit of the firms improved upon privatization. The factors that are responsible to the performance changes differ depending on the performance proxies. The factors responsible for ROS are the short-term debt to total asset and the share allocated to employee, the fraction of share sold and the share allocated to employee are responsible for ROA, while the ROE is affected by the top management team change only. The real sale is influenced by the fraction of share sold and the share allocated to employee, while net profit is not affected by any factor considered in this study.
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