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Impact of MoU on financial performance of public sector enterprises in India

Impact of MoU on financial performance of public sector enterprises in India Purpose – Memorandum of Understanding (MoU) has been conceived as an instrument to quantify/assess social and commercial obligations/performance of central public sector enterprises (PSEs) in India. The purpose of this paper is to measure the financial performance of the MoU PSEs and to compare their performance with PSEs which have not opted for MoU (referred to as non‐MoU PSEs) over a period of 13 years. Design/methodology/approach – Financial ratio is a well accepted technique to assess financial performance. Accordingly, the financial performance of CPSEs has been assessed on the basis of 15 ratios pertaining to the profitability, efficiency, liquidity and solvency. Findings – The findings suggest that MoU seems to have yielded decisive improvement in the performance of PSEs which have signed MoUs during the period of the study under reference. At the same time, the performance of non‐MoU PSEs is unsatisfactory. In sum, MoU have enhanced not only commercial profitability but also have enhanced operational efficiency of the PSEs. Research limitations/implications – The paper focuses only on financial aspects; the significant non‐financial aspects such as social responsibilities, environments etc. are not reckoned in the study to judge the total performance. Originality/value – The study is the first of the type to cover a long time‐span of 13 years to assess virtually all non‐financial CPSEs operating in India. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Advances in Management Research Emerald Publishing

Impact of MoU on financial performance of public sector enterprises in India

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References (41)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0972-7981
DOI
10.1108/09727981111175984
Publisher site
See Article on Publisher Site

Abstract

Purpose – Memorandum of Understanding (MoU) has been conceived as an instrument to quantify/assess social and commercial obligations/performance of central public sector enterprises (PSEs) in India. The purpose of this paper is to measure the financial performance of the MoU PSEs and to compare their performance with PSEs which have not opted for MoU (referred to as non‐MoU PSEs) over a period of 13 years. Design/methodology/approach – Financial ratio is a well accepted technique to assess financial performance. Accordingly, the financial performance of CPSEs has been assessed on the basis of 15 ratios pertaining to the profitability, efficiency, liquidity and solvency. Findings – The findings suggest that MoU seems to have yielded decisive improvement in the performance of PSEs which have signed MoUs during the period of the study under reference. At the same time, the performance of non‐MoU PSEs is unsatisfactory. In sum, MoU have enhanced not only commercial profitability but also have enhanced operational efficiency of the PSEs. Research limitations/implications – The paper focuses only on financial aspects; the significant non‐financial aspects such as social responsibilities, environments etc. are not reckoned in the study to judge the total performance. Originality/value – The study is the first of the type to cover a long time‐span of 13 years to assess virtually all non‐financial CPSEs operating in India.

Journal

Journal of Advances in Management Research – Emerald Publishing

Published: Nov 1, 2011

Keywords: India; Public sector organizations; Financial performance; Profitability; Operating efficiency; Memorandum of Understanding

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