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The determinants of privatization prices: evidence from Turkey

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  • Kerim Peren Arin
  • Cagla Okten

Abstract

This paper analyses the determinants of privatization prices in a multi-industry study using a sample of 68 recently privatized firms from Turkey. Results show that revenue and market characteristics are significant determinants of privatization prices while current cost and profit indicators are not. It is argued that potential buyers regard these state firms as inefficient, therefore do not take into consideration their current costs and profits in determining their value. When the dependent variable is altered by dividing the firm's privatization price by the firm's sales (revenues), it is found that sales-adjusted privatization prices are responsive to firms profit margins. However, this result does not hold when the sample is restricted to a single industry. Profit margins along with other profitability and firm efficiency measures are no longer significant determinants of sales-adjusted privatization prices in the cement industry analysis. Unexploited production opportunities measured by capacity utilization ratios, and complete private ownership resume a more important role.

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 12 ()
Pages: 1393-1404

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Handle: RePEc:taf:applec:v:35:y:2003:i:12:p:1393-1404
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  1. Altman, Edward I, 1984. " A Further Empirical Investigation of the Bankruptcy Cost Question," Journal of Finance, American Finance Association, vol. 39(4), pages 1067-89, September.
  2. Caves, Richard E., 1990. "Lessons from privatization in Britain : State enterprise behavior, public choice, and corporate governance," Journal of Economic Behavior & Organization, Elsevier, vol. 13(2), pages 145-169, March.
  3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  4. Florencio Lopez-de-Silane, 1996. "Determinants of Privatization Prices," NBER Working Papers 5494, National Bureau of Economic Research, Inc.
  5. Jean-Jacques Laffont & Jean Tirole, 1991. "Privatization and Incentives," Working papers 572, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Paul R. Milgrom, 1985. "Auction Theory," Cowles Foundation Discussion Papers 779, Cowles Foundation for Research in Economics, Yale University.
  7. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
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Cited by:

  1. Alberto Chong & Alejandro Riaño, 2006. "El entorno político y los precios de las privatizaciones," Research Department Publications 4440, Inter-American Development Bank, Research Department.
  2. Fumitoshi Mizutani & Shuji Uranishi, 2010. "Determinants of privatization of public corporations: evidence from the Japanese experience," Empirical Economics, Springer, vol. 39(2), pages 515-535, October.
  3. Alberto Chong & Jorge Guillen & Alejandro Riano, 2010. "Political and institutional environment and privatization prices," Public Choice, Springer, vol. 142(1), pages 91-110, January.
  4. Alberto Chong & Alejandro Riaño, 2006. "Political Environment and Privatization Prices," Research Department Publications 4439, Inter-American Development Bank, Research Department.
  5. Gao, Song, 2010. "Impacts of Restructurings on Manufacturing Productive Efficiency: Evidence from China," MPRA Paper 24766, University Library of Munich, Germany.

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