Ownership Structure and Technical Efficiency of Large Scale Industrial Sector of Pakistan
Author: Sidra Sadiq

Technical efficiency is the fundamental measure to check performance of any sector. This study examines the effect of ownership structure on the performance of large scale manufacturing sector of Pakistan. Data from Census of Manufacturing Industries (CMI) has been used for the years 1991 and 2006. Three digit industries of Pakistan comprising of 32 large scale groups have been analyzed. Maximum likelihood estimation technique has been used for stochastic frontier cobb-Douglas production function to estimate technical efficiency. Labor and capital enhance the industrial output. Private and public ownership structures as compare to joint ventures have negative impact on output of the industry. Foreign ownership proved to be more profitable as compare to joint ventures in both years. Further more efficiency scores are calculated through SFA and 29 out of 32 LSM came up as having increasing trend in efficiency in 2006 as compare to 1991. Petroleum refinery turned up as top efficiency scorer while ginning and bailing of fiber as least scorer. Mean efficiency for the year 1991 stood at 19.08 and 53.03 for 2006. This can be attributed to the reforms initiated in late 1980s which were aimed at creating a better business environment for foreign and domestic investors. Regressing efficiency scores on ownership structures revealed that all structures are negatively impacting efficiency in 1991 whereas for the year 2006 these coefficients turned out to be positive for 2006. As far as ownership structure is concerned private ownership has been increased in almost all of the industrial groups except beverage industry, ginning and bailing of fiber, tobacco, industrial chemical and products of petroleum. Public ownership has been decreased in all industries while foreign ownership structure has also increased. In a nutshell, this study deduced that ownership structure actually influences the performance of LSM. So high attention must be paid on deciding which form of ownership is feasible for which producing unit so that industrial sector can operate at full potential. Supervisor:- Dr Rehana Siddique

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Supervisor: Rehana Siddiqui

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