Do Retail Incentives Work in Privatizations?
London Business School
October 19, 2005
EFA 2004 Maastricht Meetings Paper No. 04688
Twenty countries around the world have used $27 billion in incentives such as bonus shares and discounts to attract retail investors to participate in privatizations and to discourage them from flipping. Our results show that incentives have performed well, increasing retail investor participation much more cost-effectively than underpricing. Flipping is not only much reduced in the short term, but also declines by at least 15% over a period of 1,000 trading days. The expiration of bonus share plans is associated with a six-day abnormal return of -1.1% and a long-term increase in trading volume.
Number of Pages in PDF File: 45
Keywords: Privatization, Equity Offerings, Bonus Shares, Discounts, Flipping
JEL Classification: D78, G14, G32, G38, L33working papers series
Date posted: August 9, 2004 ; Last revised: October 2, 2008
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