Can Governments signal commitment in privatization sales?
AbstractThe literature on staggered privatization sales suggests that governments can effectively signal commitment to not expropriate the future rents of privatized firms. The privatization of telephone firms around the world provides an excellent opportunity to test this theory. Using a sample of repeated privatization sales I test whether governments can effectively signal commitment by selling ownership gradually and transferring managerial control immediately. The use of panel data with fixed-effects provides consistent estimates when commitment is not observed and time-invariant. Unobserved commitment is rendered time-invariant by using repeated sales within a government administration, typically within two years. The results cast doubt on the ability of governments to effectively signal commitment and increase the market value of firms in privatization sales. These results hold for several signals tested.
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Bibliographic InfoArticle provided by IEF in its journal Hacienda Pública Española/Revista de Economía Pública.
Volume (Year): 197 (2011)
Issue (Month): 2 (June)
Privatization; signal; commitment;
Find related papers by JEL classification:
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
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