Why Do Governments Sell Privatised Companies Abroad?

This paper provides an empirical analysis of Governments' decisions to sell privatised companies on both international and domestic markets in a sample of 392 privatisations in 42 countries. Political theories of privatisation find strong support in our analyses: market oriented Governments favour domestic investors in the allocation of shares. Furthermore, the need to penetrate foreign markets and to warrant better legal protection to shareholders also appear as relevant. Significant differences emerge in OECD and non-OECD countries. In wealthy economies stock market liquidity favours cross-listing, while in emerging countries Governments resort to cross-list in order to "import" liquidity and to develop domestic stock markets. Legal institutions also play a different role. In OECD countries, weak shareholder protection induces Governments to cross-list, in order to borrow the reputation and best practices of established exchanges. On the other hand, creditors' protection is more relevant in non-OECD countries, where weak legal protection of creditors reduces the scope of bank finance, forcing Governments to look for external finance abroad.http://deepblue.lib.umich.edu/bitstream/2027.42/39677/3/wp293.pd

Privatisation and Institutions: A Cross Country Analysis

Privatisation, i.e. the transfer of ownership and control of state-owned enterprises, is a worldwide phenomenon. Which political, economic and institutional factors are shaping this process? This paper addresses the issue presenting new evidence from a sample of 49 countries. From an empirical analysis of the period 1977-96, the decision to privatise and the choice of privatisation method appear to be influenced by the governing political majority and public sector budget constraints, while the success of privatisation in terms of revenues and stakes sold requires suitable institutions and developed capital markets.Keywords: Privatisation, politics, budget deficit, investor protection, enforcement of law, capital markets

Why Do Governments Sell Privatised Companies Abroad?

This paper provides an empirical analysis of Governments' decisions to sell privatised companies on both international and domestic markets in a sample of 392 privatisations in 42 countries. Political theories of privatisation find strong support in our analyses: market oriented Governments favour domestic investors in the allocation of shares. Furthermore, the need to penetrate foreign markets and to warrant better legal protection to shareholders also appear as relevant. Significant differences emerge in OECD and non-OECD countries. In wealthy economies stock market liquidity favours cross-listing, while in emerging countries Governments resort to cross-list in order to "import" liquidity and to develop domestic stock markets. Legal institutions also play a different role. In OECD countries, weak shareholder protection induces Governments to cross-list, in order to borrow the reputation and best practices of established exchanges. On the other hand, creditors' protection is more relevant in non-OECD countries, where weak legal protection of creditors reduces the scope of bank finance, forcing Governments to look for external finance abroad.privitisation, cross-listing, international financial markets, political economy, investor protection