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Can Governments signal commitment in privatization sales?

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  • Bruno Viani

    () (University of Peru)

Abstract

The 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.

Suggested Citation

  • Bruno Viani, 2011. "Can Governments signal commitment in privatization sales?," Hacienda Pública Española, IEF, vol. 197(2), pages 87-110, June.
  • Handle: RePEc:hpe:journl:y:2011:v:197:i:2:p:87-110
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
    2. Massimo Florio & Katiuscia Manzoni, 2004. "Abnormal returns of UK privatizations: from underpricing to outperformance," Applied Economics, Taylor & Francis Journals, vol. 36(2), pages 119-136.
    3. Bruno Viani, 2007. "Monopoly rights in the privatization of telephone firms," Public Choice, Springer, vol. 133(1), pages 171-198, October.
    4. Nakil Sung & Yong-Hun Lee, 2002. "Substitution between Mobile and Fixed Telephones in Korea," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(4), pages 367-374, June.
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    More about this item

    Keywords

    Privatization; signal; commitment;

    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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