The Price of Government Ownership: A Study of the Domtar Takeover

17 Pages Posted: 11 Jul 2011

See all articles by Catherine C. Eckel

Catherine C. Eckel

Texas A&M University

Anthony E. Boardman

University of British Columbia (UBC) - Division of Strategy and Business Economics

Ruth Freedman

Independent

Date Written: December 1, 1986

Abstract

This paper presents an analysis of how government ownership of an enterprise may affect its profitability. In August 1981, two Quebec Crown Corporations announced that they had gained control of Domtar, a private Canadian corporation. Upon receipt of this information the stock's market value dropped significantly. Over six trading days, Domtar's shareholders suffered cumulative abnormal returns of minus 25 percent, which is equivalent to a reduction in market value of approximately $150 million. Much of this loss can be attributed to government control and the anticipated pursuit of non-profit objectives.

Suggested Citation

Eckel, Catherine C. and Boardman, Anthony E. and Freedman, Ruth, The Price of Government Ownership: A Study of the Domtar Takeover (December 1, 1986). Journal of Public Economics, Vol. 31, No. 3, p. 269, 1986, Available at SSRN: https://ssrn.com/abstract=1883667

Catherine C. Eckel (Contact Author)

Texas A&M University ( email )

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

Anthony E. Boardman

University of British Columbia (UBC) - Division of Strategy and Business Economics ( email )

2053 Main Mall
Vancouver, British Columbia
Canada

Ruth Freedman

Independent

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