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Why Do Governments Privatize Abroad?

Author

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  • Bernardo Bortolotti
  • Marcella Fantini
  • Carlo Scarpa

Abstract

Privatization through global equity market placement has largely contributed to financial market development and integration. Despite the relevance of the fact, the reasons underlying governments' choice to sell shares of privatized companies abroad are still poorly understood. This paper presents new evidence for a sample of 233 share issue privatizations in 20 OECD countries, showing that redistribution concerns and the objective of domestic financial market development make domestic privatization more likely. However, if budget constraints are binding, governments tend to sell abroad a larger quantity of shares, particularly when corporate governance at home is weak.

Suggested Citation

  • Bernardo Bortolotti & Marcella Fantini & Carlo Scarpa, 2002. "Why Do Governments Privatize Abroad?," International Review of Finance, International Review of Finance Ltd., vol. 3(2), pages 131-161, June.
    • Handle: RePEc:bla:irvfin:v:3:y:2002:i:2:p:131-161
    DOI: 10.1111/1468-2443.00036
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    References listed on IDEAS

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    1. Davide Lombardo & Marco Pagano, 1999. "Legal Determinants of the Return on Equity," CSEF Working Papers 24, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Dec 2000.
    2. Oren Fuerst, 1998. "A Theoretical Analysis of the Investor Protection Regulations Argument for Global Listing of Stocks," Yale School of Management Working Papers ysm106, Yale School of Management.
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    Cited by:

    1. Boubakri, Narjess & Cosset, Jean-Claude & Samet, Anis, 2010. "The choice of ADRs," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2077-2095, September.
    2. Boubakri, Narjess & Chen, Ruiyuan (Ryan) & El Ghoul, Sadok & Guedhami, Omrane & Nash, Robert, 2020. "State ownership and stock liquidity: Evidence from privatization," Journal of Corporate Finance, Elsevier, vol. 65(C).
    3. Bouwe Dijkstra & Anuj Mathew & Arijit Mukherjee, 2015. "Privatization in the presence of foreign competition and strategic policies," Journal of Economics, Springer, vol. 114(3), pages 271-290, April.
    4. Korczak, Adriana & Korczak, Piotr, 2013. "The development of emerging stock markets and the demand for cross-listing," Journal of Empirical Finance, Elsevier, vol. 24(C), pages 63-77.
    5. de la Torre, Augusto & Gozzi, Juan Carlos & Schmukler, Sergio L., 2007. "Stock market development under globalization: Whither the gains from reforms?," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1731-1754, June.
    6. Sun, Qian & Tong, Wilson H.S. & Wu, Yujun, 2013. "Overseas listing as a policy tool: Evidence from China’s H-shares," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1460-1474.
    7. Abdallah, Wissam & Goergen, Marc, 2008. "Does corporate control determine the cross-listing location?," Journal of Corporate Finance, Elsevier, vol. 14(3), pages 183-199, June.
    8. Alberto Peralta & Luis Rubalcaba, 2021. "How Governance Paradigms and Other Drivers Affect Public Managers’ Use of Innovation Practices. A PLS-SEM Analysis and Model," Mathematics, MDPI, vol. 9(9), pages 1-28, May.
    9. Simone Linke & Sabrina Erlwein & Martina van Lierop & Elizaveta Fakirova & Stephan Pauleit & Werner Lang, 2022. "Climate Change Adaption between Governance and Government—Collaborative Arrangements in the City of Munich," Land, MDPI, vol. 11(10), pages 1-27, October.
    10. Arijit Mukherjee & Kullapat Suetrong, 2013. "Privatization, Incentive Delegation and Foreign Direct Investment," Open Economies Review, Springer, vol. 24(4), pages 657-676, September.
    11. Omrane Guedhami & Jeffrey A. Pittman, 2006. "Ownership Concentration in Privatized Firms: The Role of Disclosure Standards, Auditor Choice, and Auditing Infrastructure," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 44(5), pages 889-929, December.
    12. Schuster, Philipp & Schmitt, Carina & Traub, Stefan, 2013. "The retreat of the state from entrepreneurial activities: A convergence analysis for OECD countries, 1980–2007," European Journal of Political Economy, Elsevier, vol. 32(C), pages 95-112.
    13. 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.
    14. Juliet D’Souza & William L. Megginson & Robert Nash, 2013. "An empirical analysis of cross-listing decisions in share-issue privatizations: evidence from developed and developing countries," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 23, pages 531-551, Edward Elgar Publishing.
    15. Diana Panke, 2020. "Regional cooperation through the lenses of states: Why do states nurture regional integration?," The Review of International Organizations, Springer, vol. 15(2), pages 475-504, April.

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