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The Withdrawal of the State from Economic Activity: An Austrian Capital Market Perspective

Author

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  • Helmenstein, Christian

    (Department of Economics, Institute for Advanced Studies, Vienna)

Abstract

In this paper we investigate the success of recent privatization in Austria from a capital market perspective. The empirical analysis draws upon the concept of initial public offerings indexes to document the medium-run aftermarket performance of initial public offerings (IPOs). Due to certain peculiarities, governmental IPOs outperform non-governmental IPOs in terms of cumulative average returns. Among the approaches discussed, the theory of property rights, together with the economic theory of politics, appears to be particularly appealing in explaining this phenomenon. If market participants adjust their investment decisions accordingly, the superior performance of governmental IPOs must, however, be expected to vanish during later stages of a privatization program. The withdrawal of the state from the ownership of enterprises has repercussions on the expansion of existing private companies due to rising capital costs. Privatization programs thus temporarily inhibit the substitution of inside equity by outside equity in private companies.

Suggested Citation

  • Helmenstein, Christian, 1995. "The Withdrawal of the State from Economic Activity: An Austrian Capital Market Perspective," Economics Series 19, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:19
    as

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    File URL: http://www.ihs.ac.at/publications/eco/es-19.pdf
    File Function: First version, 1995
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    References listed on IDEAS

    as
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    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    4. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    5. Haefke, Christian & Helmenstein, Christian, 1996. "Neural Networks in the Capital Markets: An Application to Index Forecasting," Computational Economics, Springer;Society for Computational Economics, vol. 9(1), pages 37-50, February.
    6. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
    7. Niskanen, William A, 1975. "Bureaucrats and Politicians," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 617-643, December.
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    13. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Initial Public Offerings; Privatization; Stock Market Index; Performance Analysis;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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