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The constraints on full privatization: International evidence

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  • Boubakri, Narjess
  • Cosset, Jean-Claude
  • Saffar, Walid

Abstract

Using a cross-country sample of 406 non-financial firms in 44 countries, we examine, based on firm and country level data, the decisions of governments to resort to gradual, staggered sales that result in full privatization. We report that 168 firms over the 1995–2009 period were fully privatized. It takes seven years on average for a government to completely privatize an SOE. Using the Cox proportional hazard model, we find that full privatization is a slower process in collectivist societies and when political constraints and employment protection laws are more stringent. Finally, we document a positive effect of full privatization on firm outcomes (namely, risk-taking, efficiency, profitability, and growth), supporting previous theoretical and empirical arguments that full relinquishment of control and ownership is required in order to change firms’ objectives.

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  • 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.
    • Handle: RePEc:eee:corfin:v:42:y:2017:i:c:p:392-407
    DOI: 10.1016/j.jcorpfin.2015.06.005
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    More about this item

    Keywords

    Privatization; Control structure; Performance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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