Building a Castle on Sand: Effects of Mass Privatization on Capital Market Creation in Transition Economies
Bank of Finland - Institute for Economies in Transition (BOFIT)
CERGE-EI Working Paper No. 256
In this paper we study the relationship between mass privatization and capital market development in the transition economies. The link is investigated empirically using a panel of data which includes most of the transition countries. Our results confirm the hypothesis that mass privatization exerted a negative influence on capital market functioning in the short and medium term. Results further indicate that in countries with mass privatization, the capital market was established and perceived only as a byproduct of the privatization process and did not serve as a source of capital for the corporate sector. This non-transparent market of thousands of securities caused negative investor sentiment and thus did not contribute to initiating economic growth.
Number of Pages in PDF File: 56
Keywords: Privatization, mass privatization, emerging capital markets, capital market
JEL Classification: G15, G28, P34working papers series
Date posted: December 8, 2005
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