Privatization and Financial Market Development in Emerging Countries: A Comparative Study
23 Pages Posted: 18 Feb 2010 Last revised: 9 Jul 2010
Date Written: March 1, 2009
This paper examines the impact of privatization on stock market size and liquidity in a multinational sample of 31 emerging markets. We find that the intensity of privatization and the use of privatization offerings on the stock market contribute to enhance stock market development (market capitalization and value traded), but the documented effects vary across geographical regions, owing to the specificities of the divestiture process. We use GMM procedure in order to estimate dynamic panel specifications and find that privatization appears to be the most beneficial in the Asian sub sample where most favourable conditions were put in place before privatization actually started. In other regions however, similar positive outcomes are yet to materialize. We derive several policy implications from our results.
Keywords: Privatization, Stock market development
JEL Classification: G15, G18
Suggested Citation: Suggested Citation