IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/4612.html
   My bibliography  Save this paper

Do Retail Incentives Work in Privatizations?

Author

Listed:
  • Keloharju, Matti
  • Torstila, Sami
  • Knüpfer, Samuli

Abstract

20 countries around the world have used incentive packages, including bonus shares and discounts, to attract retail investors to participate in privatizations. Using a unique dataset, we estimate the total cost of incentive packages at approximately $27 billion. The expiration of bonus share plans is associated with a six-day abnormal return of -1.1% and a long-term increase in volume. Incentives have been surprisingly effective in meeting stated privatization objectives. A dollar spent on retail incentives helps to attract about 21 times as many investors as a dollar spent on underpricing. Individual-level analysis shows that flipping is not only much reduced in the short term, but also declines by at least 15% over a period of 1,000 trading days.

Suggested Citation

  • Keloharju, Matti & Torstila, Sami & Knüpfer, Samuli, 2004. "Do Retail Incentives Work in Privatizations?," CEPR Discussion Papers 4612, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4612
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP4612
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

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


    Cited by:

    1. Markku Kaustia & Samuli Knüpfer & Sami Torstila, 2016. "Stock Ownership and Political Behavior: Evidence from Demutualizations," Management Science, INFORMS, vol. 62(4), pages 945-963, April.
    2. Guedhami, Omrane & Pittman, Jeffrey A. & Saffar, Walid, 2009. "Auditor choice in privatized firms: Empirical evidence on the role of state and foreign owners," Journal of Accounting and Economics, Elsevier, vol. 48(2-3), pages 151-171, December.
    3. Stavros Thomadakis & Christos Nounis & Dimitrios Gounopoulos, 2012. "Long†term Performance of Greek IPOs," European Financial Management, European Financial Management Association, vol. 18(1), pages 117-141, January.
    4. Lulu Gu & W. Robert Reed, 2011. "One For All or All For One? Using Multiple-listing Information in Event Studies," Working Papers in Economics 11/33, University of Canterbury, Department of Economics and Finance.
    5. Bortolotti, Bernardo & de Jong, Frank & Nicodano, Giovanna & Schindele, Ibolya, 2007. "Privatization and stock market liquidity," Journal of Banking & Finance, Elsevier, vol. 31(2), pages 297-316, February.
    6. Satta, Giovanni & Notteboom, Theo & Parola, Francesco & Persico, Luca, 2017. "Determinants of the long-term performance of initial public offerings (IPOs) in the port industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 103(C), pages 135-153.
    7. Kaustia, Markku & Knüpfer, Samuli, 2012. "Peer performance and stock market entry," Journal of Financial Economics, Elsevier, vol. 104(2), pages 321-338.
    8. Ben-Hassoun, Amira & Aloui, Chaker & Ben-Nasr, Hamdi, 2018. "Demand for audit quality in newly privatized firms in MENA region: Role of internal corporate governance mechanisms audit," Research in International Business and Finance, Elsevier, vol. 45(C), pages 334-348.
    9. Paul B. McGuinness, 2016. "Post-IPO performance and its association with subscription cascades and issuers’ strategic-political importance," Review of Quantitative Finance and Accounting, Springer, vol. 46(2), pages 291-333, February.
    10. Gu, Lulu & Reed, W. Robert, 2013. "Information asymmetry, market segmentation, and cross-listing: Implications for event study methodology," Journal of Asian Economics, Elsevier, vol. 28(C), pages 28-40.
    11. Laura Cabeza García & Silvia Gómez Ansón, 2012. "What Drives the Operating Performance of Privatised Firms?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(1), pages 1-27, February.

    More about this item

    Keywords

    Privatization; Equity offerings; Bonus shares; Discounts; Flipping;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cpr:ceprdp:4612. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    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.