You are One of Us Now! How Do Share Prices of Rivals React to Privatization?

29 Pages Posted: 20 May 2009

See all articles by Ayca Altintig

Ayca Altintig

Claremont Colleges - Peter F. Drucker Graduate School of Management

K. Peren Arin

Zayed University

Eberhard Feess

Frankfurt School of Finance & Management gemeinnützige GmbH

Christoph R. Schumacher

Massey University - Department of Commerce

Abstract

By using a unique data set from the Turkish cement industry, we analyze the impact of privatization on the market value of rival firms. Privatization increases efficiency, which is bad news for rivals. But if an incumbent buys a state owned firm, this leads to a higher market concentration which is good news for rivals. We show that privatization leads to overall positive abnormal returns for rivals because the concentration effect outweighs the efficiency effect. Consistent with our theory, this effect is reinforced when the initial market concentration is high.

Suggested Citation

Altintig, Z. Ayca and Arin, Kerim Peren and Feess, Eberhard and Schumacher, Christoph R., You are One of Us Now! How Do Share Prices of Rivals React to Privatization?. The Journal of Industrial Economics, Vol. 57, Issue 2, pp. 265-293, June 2009, Available at SSRN: https://ssrn.com/abstract=1407312 or http://dx.doi.org/10.1111/j.1467-6451.2009.00375.x

Z. Ayca Altintig (Contact Author)

Claremont Colleges - Peter F. Drucker Graduate School of Management ( email )

The Drucker School of Management
1021 North Dartmouth Avenue
Claremont, CA 91711
United States

Kerim Peren Arin

Zayed University ( email )

P.O. Box 4783
Abu Dhabi
United Arab Emirates

Eberhard Feess

Frankfurt School of Finance & Management gemeinnützige GmbH ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Christoph R. Schumacher

Massey University - Department of Commerce ( email )

Auckland
New Zealand

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