Information Asymmetry, Share Mispricing and the Coordination Problem: Investor Portfolio Choice in Czech Voucher Privatization
Voucher privatization in the Czech Republic presented a natural experiment of the ability of investors to construct their portfolios under conditions of asymmetric information and the absence of stock market prices. This paper provides a theoretical model of an optimal portfolio choice made by the investors maximizing their expected return and at the same time solving a coordination problem in a non-cooperative game with other investors. The perception of share misvaluation and private information are endogenized. The model offers an interpretation and theoretical justification of earlier empirical findings and explains the crucial role of the auctioneer, different optimal strategies for different types of investors and the redundancy of legal limits constraining ownership stakes in firms. The results provide implications for the design of voucher privatization, which should lead to more efficient share distribution and price setting.
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- Barbara Katz & Joel Owen, 2001.
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01-09, New York University, Leonard N. Stern School of Business, Department of Economics.
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"Privatization Methods and Economic Growth in Transition Economies,"
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95-20, New York University, Leonard N. Stern School of Business, Department of Economics.
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- Raj Aggarwal & Joel T. Harper, 2000. "Equity Valuation in the Czech Voucher Privatization Auctions," Financial Management, Financial Management Association, vol. 29(4), Winter.
- Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
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- Jan Svejnar & Miroslav Singer, 1994. "Using vouchers to privatize an economy: the Czech and Slovak case," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(1), pages 43-69, 03.
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