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

Abstract

We examine the impact of political, institutional, and economic factors on the choice between selling a state-owned enterprise in the public capital market through a share issue privatization (SIP) and selling it in the private capital market in an asset sale. SIPs are more likely in less developed capital markets, for more profitable stateowned enterprises, and where there are more protections of minority shareholders. Asset sales are more likely when there is less state control of the economy and when the firm is smaller. Our results suggest the importance of privatization activities in developing the equity markets of privatizing countries.

Privatization and globalization: An empirical analysis

“…For instance, governments facing high budget deficits, or fiscal crises are more likely to undertake privatization (Ramamurti, 1992). Also, Megginson, Nash, Netter and Poulsen (2004) argue that countries with higher deficits are more likely to privatize state-owned assets by share issued privatizations (SIPs) than by private sales. However, Boubakri, Cosset and Guedhami (2005a) show that whether privatization is implemented by SIPs or private sales in developing countries, foreign direct investment is omnipresent (foreign investors participated in 86% of privatization transactions between 1980 and 1999 in developing countries).…”

Economic value added (eva) as a performance measurement for glcs vs non-glcs: evidence from bursa malaysia

“…There are numerous other studies which indicate that GLCs are less efficient compared to non-GLCs. Those studies include Megginson et al, (2004), Barth et al, (2000), Nellis (1994), Kumar (1993), andBroadman andVining (1992).…”

The going public decision and the structure of equity markets

“…Yet, none of them modify the size of the average industry complete-market beta coefficient. Megginson et al (2004) present the idea that privatizations can spur financial market development in a country. Subrahmanyan and Titman (1999) support this idea and argue that a privatization through the stock market exposes costly information to investors that otherwise would have to pay for.…”