THE EFFECTIVENESS OF PUBLIC AND PRIVATE ORGANIZATIONS: THE CASE OF MALAYSIA'S STOCK EXCHANGE COMPANIES

The aim of the study is to identify the effect of the pursuit of social objectives on the profit of companies. To do this, the quasi-experimental approach is adopted, i.e., matching comparison groups on as many variables as possible except for the pursuit of social objectives. Assuming success in doing this, then the difference in profit between them can be attributed to the pursuit/non-pursuit of social objectives. The matching procedure produced a group of 95 government-owned companies and another of 90 privately-owned companies, all of which were listed on the Kuala Lumpur Stock Exchange and competed for business and profit in Malaysia in the 1979-83 period. They were all subjected to the same regulations and incentives instituted by the government. The government-owned companies differed from the privately-owned ones in that they pursued social objectives. The two groups were compared at the macro and sectoral levels using three measures of profit, viz., Profit Before Tax (PBT), Adjusted Gross Earnings Per Share (EPS) and Return on Shareholders' Fund (RSF). The results of the macro comparison show that on PBT, the mean of government companies are considerably higher than that of private ones whilst on the standardized EPS and RSF measures, the means of government companies are only slightly higher than that of the private companies. Further, the results of the comparisons within 14 different sectors in which the 195 government and private companies compete, show that the means of the former on PBT, EPS and RSF are higher than the latter in more sectors. The results indicate that the pursuit of social objectives by government companies does affect profit but only minimally and in certain economic sectors only.