Corporatization

DEFINITION of 'Corporatization'

The act of reorganizing the structure of government owned entity into a legal entity with the corporate structure found in publicly trade companies. These companies tend to have a board of directors (B of D), management and shareholders. However, unlike publicly traded companies, the government is typically the company's only shareholder and that the shares in the company are not traded publicly.

BREAKING DOWN 'Corporatization'

The main goal of corporatization is allowing the government to retain ownership of the company but still enable it to run as efficiently as its private counterparts because government departments sometimes are inefficient with the level of bureaucracy involved.

Furthermore, the government may one day feel that the private sector could do a better job of running the company, possibly conducting an offering on the stock market in order to divest it.

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RELATED FAQS
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    The most recognized transition between the private and public markets is an initial public offering (IPO). Through an IPO, ... Read Answer >>
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    Privately-held companies are - no surprise here - privately held. This means that, in most cases, the company is owned by ... Read Answer >>
  3. How does the privatization of a publicly traded company work?

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