IDEAS home Printed from https://ideas.repec.org/a/bla/jfnres/v32y2009i2p169-197.html
   My bibliography  Save this article

Does Privatization Foster Changes In The Quality Of Legal Institutions?

Author

Listed:
  • Narjess Boubakri
  • Jean‐Claude Cosset
  • Houcem Smaoui

Abstract

We analyze the effect of privatization on the quality of legal institutions of governance. Our findings suggest that large‐scale privatization (in terms of progress and volume) increases the risk of corruption in developing countries but has no effect on the legal institutions of governance (i.e., law and order and investor protection). The method of privatization (public share issues versus private sales) helps curb corruption and improve the quality of law enforcement and of investor protection. In developed countries, the progress and volume of privatization reduce the risk of corruption, and the method of privatization enhances the quality of law enforcement.

Suggested Citation

  • Narjess Boubakri & Jean‐Claude Cosset & Houcem Smaoui, 2009. "Does Privatization Foster Changes In The Quality Of Legal Institutions?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 32(2), pages 169-197, June.
    • Handle: RePEc:bla:jfnres:v:32:y:2009:i:2:p:169-197
    DOI: 10.1111/j.1475-6803.2009.01247.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1475-6803.2009.01247.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1475-6803.2009.01247.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
    2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    4. Beck, Thorsten & Levine, Ross, 2004. "Stock markets, banks, and growth: Panel evidence," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 423-442, March.
    5. Perotti, Enrico C. & van Oijen, Pieter, 2001. "Privatization, political risk and stock market development in emerging economies," Journal of International Money and Finance, Elsevier, vol. 20(1), pages 43-69, February.
    6. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    7. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    8. Wi Saeng Kim & Esmeralda Lyn & Edward J. Zychowicz, 2005. "Can Stock Market Liberalization In Emerging Economies Mitigate Legal Systems Deficiencies?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 28(3), pages 421-437, September.
    9. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2005. "Does financial liberalization spur growth?," Journal of Financial Economics, Elsevier, vol. 77(1), pages 3-55, July.
    10. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    11. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    12. Bortolotti, Bernardo & Fantini, Marcella & Siniscalco, Domenico, 2004. "Privatisation around the world: evidence from panel data," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 305-332, January.
    13. J. Stiglitz, 1999. "Whither Reform? Ten Years of the Transition," Voprosy Ekonomiki, NP Voprosy Ekonomiki, vol. 7.
    14. Geert Bekaert & Campbell Harvey & Christian T. Lundblad, 2003. "Equity market liberalization in emerging markets," Review, Federal Reserve Bank of St. Louis, vol. 85(Jul), pages 53-74.
    15. Knack, Stephen & Keefer, Philip, 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators," MPRA Paper 23118, University Library of Munich, Germany.
    16. Jones, Steven L. & Megginson, William L. & Nash, Robert C. & Netter, Jeffry M., 1999. "Share issue privatizations as financial means to political and economic ends," Journal of Financial Economics, Elsevier, vol. 53(2), pages 217-253, August.
    17. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
    18. Maria K. Boutchkova & William L. Megginson, 2000. "Privatization and the Rise of Global Capital Markets," Financial Management, Financial Management Association, vol. 29(4), Winter.
    19. Boubakri, Narjess & Cosset, Jean-Claude & Guedhami, Omrane, 2005. "Postprivatization corporate governance: The role of ownership structure and investor protection," Journal of Financial Economics, Elsevier, vol. 76(2), pages 369-399, May.
    20. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    21. Mr. Andrew Berg & Anne O. Krueger, 2003. "Trade, Growth, and Poverty: A Selective Survey," IMF Working Papers 2003/030, International Monetary Fund.
    22. Bekaert, Geert, 1995. "Market Integration and Investment Barriers in Emerging Equity Markets," The World Bank Economic Review, World Bank, vol. 9(1), pages 75-107, January.
    23. Bruno Biais & Enrico Perotti, 2002. "Machiavellian Privatization," American Economic Review, American Economic Association, vol. 92(1), pages 240-258, March.
    24. Perotti, Enrico C, 1995. "Credible Privatization," American Economic Review, American Economic Association, vol. 85(4), pages 847-859, September.
    25. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
    26. Bortolotti, Bernardo & Fantini, Marcella & Siniscalco, Domenico, 2001. "Privatisation: politics, institutions, and financial markets," Emerging Markets Review, Elsevier, vol. 2(2), pages 109-137, June.
    27. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liao, Tsai-Ju, 2015. "Local clusters of SOEs, POEs, and FIEs, international experience, and the performance of foreign firms operating in emerging economies," International Business Review, Elsevier, vol. 24(1), pages 66-76.
    2. Steve Billon & Robert Gillanders, 2016. "State ownership and corruption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(6), pages 1074-1092, December.
    3. Noemí Peña‐Miguel & Beatriz Cuadrado‐Ballesteros, 2018. "The role of governance in privatisation reforms: A European analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 65(5), pages 479-500, November.
    4. Miletkov, Mihail & Wintoki, M. Babajide, 2012. "Financial development and the evolution of property rights and legal institutions," Emerging Markets Review, Elsevier, vol. 13(4), pages 650-673.
    5. Cheryl Long & Jing Zhang & Jin Yang, 2021. "Uncovering asset stripping during China's privatization," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 29(4), pages 651-680, October.
    6. Boubakri, Narjess & Cosset, Jean-Claude & Debab, Nassima & Valéry, Pascale, 2013. "Privatization and globalization: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1898-1914.
    7. Noemí Peña-Miguel & Beatriz Cuadrado-Ballesteros, 2021. "Effect of privatisation on income inequality: a European analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(3), pages 697-716, August.
    8. Narjess Boubakri & Jean-Claude Cosset & Nassima Debab & Pascale Valéry, 2011. "Privatization and Globalization: an Empirical Analysis," Cahiers de recherche 1130, CIRPEE.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Enrico C. Perotti & Luc Laeven & Pieter van Oijen, 2000. "Confidence Building in Emerging Stock Markets," William Davidson Institute Working Papers Series 366, William Davidson Institute at the University of Michigan.
    2. Bortolotti, Bernardo & Fantini, Marcella & Siniscalco, Domenico, 2004. "Privatisation around the world: evidence from panel data," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 305-332, January.
    3. Jean-Pierre Allegret & Sana Azzabi, 2014. "Intégration financière internationale et croissance économique dans les pays émergents et en développement : le canal du développement financier," Revue d’économie du développement, De Boeck Université, vol. 22(3), pages 27-68.
    4. Borisova, Ginka & Cowan, Arnold R., 2014. "Government asset sales, economic nationalism, and acquirer wealth effects," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 351-368.
    5. Boubakri, Narjess & Cosset, Jean-Claude & Saffar, Walid, 2017. "The constraints on full privatization: International evidence," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 392-407.
    6. Saffar, Walid, 2014. "The political economy of share issue privatization: International evidence," Journal of Multinational Financial Management, Elsevier, vol. 24(C), pages 1-18.
    7. Cosset, Jean-Claude & Somé, Hyacinthe Y. & Valéry, Pascale, 2016. "Credible reforms and stock return volatility: Evidence from privatization," Journal of Banking & Finance, Elsevier, vol. 72(C), pages 99-120.
    8. Smaoui, Houcem & Nechi, Salem, 2017. "Does sukuk market development spur economic growth?," Research in International Business and Finance, Elsevier, vol. 41(C), pages 136-147.
    9. repec:hal:spmain:info:hdl:2441/o45fqtltm960r11iq437ski90 is not listed on IDEAS
    10. Boubakri, Narjess & Cosset, Jean-Claude & Guedhami, Omrane & Saffar, Walid, 2011. "The political economy of residual state ownership in privatized firms: Evidence from emerging markets," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 244-258, April.
    11. Filipe R. Campante & Davin Chor & Quoc‐Anh Do, 2009. "Instability And The Incentives For Corruption," Economics and Politics, Wiley Blackwell, vol. 21(1), pages 42-92, March.
    12. Thorsten Beck, 2009. "The Econometrics of Finance and Growth," Palgrave Macmillan Books, in: Terence C. Mills & Kerry Patterson (ed.), Palgrave Handbook of Econometrics, chapter 25, pages 1180-1209, Palgrave Macmillan.
    13. Comlanvi Jude EGGOH, 2009. "Développement financier, instabilité financière et croissance économique : un réexamen de la relation," LEO Working Papers / DR LEO 444, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    14. Boubakri, Narjess & Hamza, Olfa, 2007. "The dynamics of privatization, the legal environment and stock market development," International Review of Financial Analysis, Elsevier, vol. 16(4), pages 304-331.
    15. Boubakri, Narjess & Cosset, Jean-Claude & Debab, Nassima & Valéry, Pascale, 2013. "Privatization and globalization: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1898-1914.
    16. Seven, Ünal & Yetkiner, Hakan, 2016. "Financial intermediation and economic growth: Does income matter?," Economic Systems, Elsevier, vol. 40(1), pages 39-58.
    17. Ongo Nkoa, Bruno Emmanuel & Song, Jacques Simon, 2020. "Does institutional quality affect financial inclusion in Africa? A panel data analysis," Economic Systems, Elsevier, vol. 44(4).
    18. W.N.W Azman‐Saini & Peter Smith, 2011. "Finance And Growth: New Evidence On The Role Of Insurance," South African Journal of Economics, Economic Society of South Africa, vol. 79(2), pages 111-127, June.
    19. Schneider, Sophie Therese, 2018. "North-South trade agreements and the quality of institutions: Panel data evidence," Hohenheim Discussion Papers in Business, Economics and Social Sciences 27-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    20. Arminen, Heli & Menegaki, Angeliki N., 2019. "Corruption, climate and the energy-environment-growth nexus," Energy Economics, Elsevier, vol. 80(C), pages 621-634.
    21. Belkhir, Mohamed & Ben-Nasr, Hamdi, 2016. "Labor protection and the privatization or partial privatization method," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 305-322.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfnres:v:32:y:2009:i:2:p:169-197. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/sfaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.