Do Retail Incentives Work in Privatizations?

Posted: 19 Sep 2008

See all articles by Matti Keloharju

Matti Keloharju

Aalto University - School of Business; Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Samuli Knüpfer

BI Norwegian Business School; Research Institute of Industrial Economics (IFN)

Sami Torstila

Aalto University

Multiple version iconThere are 4 versions of this paper

Date Written: September 2008

Abstract

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 their shares. 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 remains cumulatively at least 15% lower after 1000 trading days. The expiration of bonus share plans is associated with a 6-day abnormal return of –1.0% and a long-term increase in trading volume.

Keywords: D78, G14, G32, G38, L33

Suggested Citation

Keloharju, Matti and Knüpfer, Samuli and Torstila, Sami, Do Retail Incentives Work in Privatizations? (September 2008). The Review of Financial Studies, Vol. 21, Issue 5, pp. 2061-2095, 2008. Available at SSRN: https://ssrn.com/abstract=1270455 or http://dx.doi.org/hhl033

Matti Keloharju (Contact Author)

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076
Finland
+358 40 353 8043 (Phone)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Samuli Knüpfer

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.samuliknupfer.com

Research Institute of Industrial Economics (IFN)

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Sami Torstila

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland
+358 40 353 8069 (Phone)

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