Memorandum of Understanding and firm performance: an assessment of the performance of Indian public sector firms adopting the Memorandum of Understanding

Due to the unsatisfactory performance of the public sector, the government introduced a memorandum of understanding and disintegration. This study was conducted to analyze the performance of MOU signatories over the years. In addition, the performance of disintegrated companies that signed the letter of intent and non-disintegrated companies that signed the letter of intent were also examined. Performance was analyzed using various indicators: return on equity, return on assets, net income productivity per employee and sales productivity per employee. In order to analyze the effectiveness of the data, a random-effects panel regression was applied to examine the performance of sixty MOU-signing PSEs spanning 15 years (2004-2018). The results show that the profitability of non-disintegrated firms that sign a memorandum of understanding is better than that of disintegrated firms that sign a memorandum of understanding. This is likely due to the greater effect of managerial autonomy on performance. The ratio of asset turnover, leverage and age have a significant impact on the performance of companies.