How does it matter to be owned by government? Rejuvenation of a government owned automobile company in India

Abstract

Governments undertake two roles relating to business environment. First, they frame rules, procedures and policies to regulate the business environment. Second, they invest resources in PSEs for political, ideological, social, and economic reasons. However, in the last few years the existence of PSEs has been subjected to strong criticism throughout the world. Governments are frequently seen privatizing PSEs both in the developing and developed countries. However, trade unions and employees of these PSEs agitate against privatization. They argue that the change of ownership does not necessarily improve financial performance. Further, financial losses are widely reported by both-PSEs and private owned organizations. Board for Industrial and Financial Reconstruction (BIFR), an agency which is responsible to approve revival plans for sick enterprises in India, had 3296 registered cases of sick companies at the end of financial year 2000-2001. Out of them 3121 companies were private owned organizations. Under such conditions it is important to examine the process of government's influence on performance decline and rejuvenation of PSEs. This paper examines "How does government ownership influences the management processes that lead to decline and rejuvenation of organizations?" The paper examines empirically the implications.