The Dynamics of Privatization, the Legal Environment and Stock Market Development

Posted: 5 Dec 2008 Last revised: 29 May 2013

See all articles by Narjess Boubakri

Narjess Boubakri

American University of Sharjah - School of Business and Management; HEC Montreal - Department of Finance

Olfa Hamza

University of Quebec at Montreal (UQAM) - Faculty of Management (ESG)

Date Written: January 27, 2007

Abstract

In this paper, we examine under which conditions privatization is an effective means to develop local stock markets for a panel of 61 countries over the last twenty four years. By addressing the endogeneity between privatization and stock market development, we show for the 1980-98 period that the initial legal environment is a significant contemporary determinant of stock market development, while privatization is not. When we examine the dynamics of privatization in interaction with the legal environment, we find that privatization has a two-year-lagged effect on stock market development in emerging markets, and a one-year-lagged effect in developed countries. Results for the 1999-2003 period seem to be largely affected by the global crash that followed the Asian crisis.

Keywords: Stock market development, Privatization, Law, Emerging markets, Developed markets

JEL Classification: G15, G18

Suggested Citation

Boubakri, Narjess and Hamza, Olfa, The Dynamics of Privatization, the Legal Environment and Stock Market Development (January 27, 2007). International Review of Financial Analysis, Vol. 16, No. 4, 2007. Available at SSRN: https://ssrn.com/abstract=1310859

Narjess Boubakri

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

HOME PAGE: http://www.aus.edu

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Olfa Hamza (Contact Author)

University of Quebec at Montreal (UQAM) - Faculty of Management (ESG) ( email )

315 Sainte-Catherine Est
Montreal, Quebec H2X3X2
Canada
514-987-3000#4251 (Phone)

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