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Political Risk and Purchases of Privatized State-Owned Enterprises

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  • Mina C. Glambosky
  • Kimberly C. Gleason
  • Jeff Madura

Abstract

We assess the valuation effects and risk for acquirers of privatized state-owned enterprises (SOEs). The valuation effects of purchasers are positive and significant; they increase for purchasers that have recent high performance, better access to capital, and have engaged in larger acquisitions. The acquirer valuation effects are lower when the selling government is more corrupt, more bureaucratic, and a weaker financial performer. Acquirer's total and unsystematic risk increases, indicating that purchasers of SOEs realize diversification benefits. Systematic risk increases for purchasers when the government is characterized by high political risk. Copyright (c) 2010, The Eastern Finance Association.

Suggested Citation

  • Mina C. Glambosky & Kimberly C. Gleason & Jeff Madura, 2010. "Political Risk and Purchases of Privatized State-Owned Enterprises," The Financial Review, Eastern Finance Association, vol. 45(3), pages 873-889, August.
  • Handle: RePEc:bla:finrev:v:45:y:2010:i:3:p:873-889
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    Cited by:

    1. Mohsni, Sana & Otchere, Isaac, 2014. "Risk taking behavior of privatized banks," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 122-142.
    2. Glambosky, Mina & Gleason, Kimberly & Murdock, Maryna, 2015. "Political risk and the factors that affect international bids," Global Finance Journal, Elsevier, vol. 28(C), pages 68-83.
    3. Surendranath R. Jory & Jacob Peng & Caroline O. Ford, 2010. "The wealth effects of investing in information technology: The case of Sarbanes-Oxley section 404 compliance," Review of Accounting and Finance, Emerald Group Publishing, vol. 9(3), pages 285-305, August.

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