European transport industry deregulation

Abstract

PurposeThis paper aims to examine the impact of deregulation on the European transport industry in the form of privatization, on the managerial efficiency of a panel of deregulated transport companies.Design/methodology/approachThis research examines a data set of 25 deregulated transport companies from a sample of 12 EU nations from 1988 to 2015. Some studies have analyzed deregulation by using non-parametric models. However, only a limited number of studies focus on the impact of deregulation on the managerial efficiency. This study answers two questions: whether deregulation, in the form of privatization, in the transport sector has any effect on the managerial efficiency, on the profitability and on the investment decisions of the firm, and whether this premise is robust enough across the European transport industry. This study formulates a multivariate regression framework utilizing data from major privatized European transport companies. The final panel includes 25 companies, from 12 EU - Member States for the period 1988-2015, equaling 375 firm-year observations based on a rigorous selection methodology.FindingsThe study confirms that transport companies, post-privatization, are more efficient regarding operating efficiency and profitability. The authors find no evidence that deregulation improves investment efficiency.Social implicationsThe study addresses the regulators’ dilemma, whether to deregulate, by focusing on analyzing the improvement of the managerial efficiency.Originality/valueThis study contributes to the transport industry management literature in three ways. First, the authors update the literature of the economic theory of regulation with an empirical examination which covers the latest years across the EU Member States. Second, the authors introduce a comparison of the effects of deregulation on different components of the managerial efficiency, namely, investment, profitability and operating efficiency of the incumbents in the EU transport industry. Third, they examine deregulation by using two approaches: a traditional one where deregulation is a dummy variable assessing the overall effect on incumbents’ efficiency performance; and a novel approach where the Organisation for Economic Co-operation and Development’s deregulation index is used to measure the regulation intensity, accounting also for industry-wide impact assessment. This two-sided approach increases the robustness of the results.