Foreign Investor Participation in Privatizations: Does the Institutional Environment Matter?

31 Pages Posted: 12 May 2004

See all articles by Narjess Boubakri

Narjess Boubakri

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

Jean-Claude Cosset

HEC Montreal

Omrane Guedhami

University of South Carolina - Moore School of Business

Mohammed Omran

The Insurance Holding Company; Arab Academy for Science and Technology

Abstract

Using a two-stage estimation procedure, we examine the determinants of foreign investors' participation in the privatization process of developing countries, with a particular emphasis on the role of the institutional environment. First, we estimate the probability that foreign investors target privatized firms in a given country. We show that an investor-friendly institutional environment which protects shareholders' rights favors foreign investors' participation. Foreigners also prefer large firms from high growth economies and socially stable countries with low political risk. Second, we restrict our analysis to those firms that foreign investors actually choose. We show that the use of private sales is a key determinant of foreign investors' stake in a privatized firm.

Suggested Citation

Boubakri, Narjess and Cosset, Jean-Claude and Guedhami, Omrane and Omran, Mohammed M., Foreign Investor Participation in Privatizations: Does the Institutional Environment Matter?. EFMA 2004 Basel Meetings Paper. Available at SSRN: https://ssrn.com/abstract=499062 or http://dx.doi.org/10.2139/ssrn.499062

Narjess Boubakri (Contact Author)

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

Jean-Claude Cosset

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6872 (Phone)
514-340-6987 (Fax)

Omrane Guedhami

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

Columbia, SC
United States

Mohammed M. Omran

The Insurance Holding Company ( email )

7 Talet Herb Street
Cairo
Egypt

Arab Academy for Science and Technology ( email )

P.O. Box. 1029
College of Management and Technology
Miami, Alexandria
Egypt
(203) 5482 532 (Phone)
(203) 5566 072 (Fax)

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