State Ownership and Stock Liquidity: Evidence from Privatization

67 Pages Posted: 13 Jun 2017 Last revised: 14 Oct 2020

See all articles by Narjess Boubakri

Narjess Boubakri

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

Ruiyuan (Ryan) Chen

West Virginia University

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Robert C. Nash

Wake Forest University

Date Written: February 14, 2019

Abstract

We provide unique firm-level evidence of the relation between state ownership and stock liquidity. Using a broad sample of newly privatized firms (NPFs) from 53 countries over the period 1994–2014, our study identifies a non-monotonic association between state ownership and stock liquidity. The inverse U-shaped relation is consistent with trade-offs between costs and benefits of state ownership and suggests an optimal level of government shareholdings that maximizes stock liquidity of NPFs. We further identify that the inflection point from the cost/benefit trade-off is contingent upon characteristics of the nation’s institutional environment.

Keywords: Privatization, government ownership, stock liquidity, valuation, cost of capital

JEL Classification: G32, G34, G35

Suggested Citation

Boubakri, Narjess and Chen, Ruiyuan and El Ghoul, Sadok and Guedhami, Omrane and Nash, Robert C., State Ownership and Stock Liquidity: Evidence from Privatization (February 14, 2019). Available at SSRN: https://ssrn.com/abstract=2984587 or http://dx.doi.org/10.2139/ssrn.2984587

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

Ruiyuan Chen

West Virginia University ( email )

1601 University Avenue
Morgantown, WV 26505
United States

Sadok El Ghoul

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami (Contact Author)

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Robert C. Nash

Wake Forest University ( email )

2601 Wake Forest Road
Winston-Salem, NC 27109
United States

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