The Choice of Private versus Public Capital Markets: Evidence from Privatizations

The dynamics of privatization, the legal environment and stock market development

“…For example, according to Megginson et al (2004), the method of privatization depends on the level of SMD. In the same vein, Bortolotti et al (2003) show that privatization is more likely to be implemented in countries with developed stock markets.…”

“…Finally, PRIV refers to both (1) the privatization intensity and (2) the method of privatization. However, PRIV is likely to be significantly affected by SMD (Megginson et al, 2004). To tackle the endogeneity problem between SMD and privatization, we use a 2SLS with instrumental variables approach.…”

“…Our study makes several contributions to the literature: First, we address the endogeneity between privatization and stock market development (SMD henceforth) since recent studies show that the reform is unlikely to be exogenous (Bortolotti, Fantini, & Siniscalco, 2003;Megginson, Nash, Netter, & Poulsen, 2004). Indeed, in most previous studies that examine the postprivatization performance of former state firms, SMD is implicitly assumed to be exogenous (Boubakri, Cosset, & Guedhami, 2005a, b;D'Souza & Megginson, 1999;Megginson, Nash, & van Randenborgh, 1994) …”

Operating and stock market performance of state-owned enterprise privatizations: The Spanish experience

“…The aforementioned results seem to support this latter argument. 8 Megginson et al (1994) argue that all governments fear these benefits will come at the economically and politically painful cost of reduced employment in 8 Megginson and Netter (2001) remark that these results could be affected by a sample selection bias, since governments tend to sell through SIPs the largest and most profitable firms (see also Megginson, Nash, Netter & Poulsen, 2004). the privatized firms.…”

The effects of changes in corporate governance and restructurings on operating performance: Evidence from privatizations

“…We observe none of these alternative forms of divestment by our sample firms.3 Megginson et al (1994),Dewenter and Malatesta (2001), andMegginson and Netter (2001) note an overall decrease in leverage following privatization.Faccio (2006) shows that politically connected firms (including state-owned enterprises) use more financial leverage because they can be assured of government financial support if they encounter distress.4 In fact,Megginson, Nash, Netter, and Poulsen (2004) show that governments of countries with under-developed capital markets launch share issue privatization programs specifically as a way to develop these markets Jones, Megginson, Nash, and Netter (1999). andBiais and Perotti (2002) examine how political and economic factors influence the pricing and allocation strategies of governments launching SIP programs.…”