Privatization and Efficiency: Industry Effects of the Sale of British Airways

24 Pages Posted: 11 Jul 2011

See all articles by Catherine C. Eckel

Catherine C. Eckel

Texas A&M University

Doug Eckel

Virginia Polytechnic Institute & State University - Pamplin College of Business

Vijay Singal

Virginia Tech

Date Written: February 1, 1997

Abstract

We analyze the effect of privatization on the performance of British Airways by examining the privatization's impact on airfares and competitors' stock prices. We find that stock prices of U.S. competitors fell a significant 7% upon British Airways' privatization, implying expectation of a more competitive British Airways. Closer rivals of British Airways experienced a greater drop in stock price than more distant rivals. Further, airfares in markets served by British Airways fell significantly upon privatization. The results suggest that a change from government to private ownership improves economic efficiency.

Keywords: Privatization, Ownership, Airlines, British Airways

JEL Classification: G32, L33, G38, L93

Suggested Citation

Eckel, Catherine C. and Eckel, Douglas W. and Singal, Vijay, Privatization and Efficiency: Industry Effects of the Sale of British Airways (February 1, 1997). Journal of Financial Economics (JFE), Vol. 43, No. 2, p. 275, 1997, Available at SSRN: https://ssrn.com/abstract=1883580

Catherine C. Eckel (Contact Author)

Texas A&M University ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

Douglas W. Eckel

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States
540-231-4450 (Phone)
540-231-4487 (Fax)

Vijay Singal

Virginia Tech ( email )

250 Drillfield Drive
Blacksburg, VA 24061
United States
5402317750 (Phone)

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