Staged Privatization: Transforming State-Owned Enterprises into Market-Based Firms

Abstract

Most privatizations around the world, especially in developed economies, are staged processes involving multiple stages of shares lockup and unlocking in the stock market.This paper proposes a theory on staged or step-by-step privatization. We show that such an approach is efficient, in the sense that it can successfully transform state-owned enterprises into efficient market-based firms. Our theory explains the popularity of staged privatizations around the world. We have also conducted empirical analysis, yielding supporting evidence for our theory.

Bargaining externalities in a privatization programme

“…See alsoJiang and Wang (2016) on the optimal speed of the staged sale of shares in a firm.2 Maw (2000, 2003) in effect use the Nash-in-Nash approach to analyze the investment behaviour of privatized firms.…”