Ownership and dynamic efficiency of petroleum firms: a new perspective

Abstract

Purpose – The purpose of this study is to examine efficiency differences among petroleum firms based on their ownership status, with the aim of helping these firms understand how specific levels of state-ownership affects efficiency and to bring new perspective to the ownership-performance literature. Design/methodology/approach – The study uses ten-year data (2001-2010) of 32 global petroleum firms categorized into four groups based on ownership types. The metafrontier analysis is used with the dynamic slack-based measure to estimate dynamic efficiency differences among the groups while respectively, accounting for carryover variables such as oil and gas reserves. Findings – Fully state-owned firms outperformed private, majority and minority state-owned firms, indicating that not all types of state-owned petroleum firms are outperformed by private firms. Additionally, firms with shared ownership between state and private are seen to have a lesser comparative advantage in the industry than those with full private or state ownership. Practical implications – Jointly owned petroleum firms should consider converting ownership to either full private or full state control. Conflict management measures should be used to handle possible conflicts between different shareholding groups. Originality/value – This is among the first studies to sub-group state ownership into various levels to comprehensively examine specific levels of state ownership that is detrimental to the performance of petroleum firms. It is also the premier oil efficiency study to use the metafrontier framework to cater for group heterogeneity. The study treats oil and gas reserves as interconnecting variables that are not consumed only in the period for which they are discovered to ensure fair assessment.