Do Retail Incentives Work in Privatizations?

45 Pages Posted: 9 Aug 2004 Last revised: 2 Oct 2008

See all articles by Matti Keloharju

Matti Keloharju

Aalto University - School of Business; Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Samuli Knüpfer

BI Norwegian Business School; Research Institute of Industrial Economics (IFN)

Sami Torstila

Aalto University

Multiple version iconThere are 4 versions of this paper

Date Written: October 19, 2005

Abstract

Twenty countries around the world have used $27 billion in incentives such as bonus shares and discounts to attract retail investors to participate in privatizations and to discourage them from flipping. Our results show that incentives have performed well, increasing retail investor participation much more cost-effectively than underpricing. Flipping is not only much reduced in the short term, but also declines by at least 15% over a period of 1,000 trading days. The expiration of bonus share plans is associated with a six-day abnormal return of -1.1% and a long-term increase in trading volume.

Keywords: Privatization, Equity Offerings, Bonus Shares, Discounts, Flipping

JEL Classification: D78, G14, G32, G38, L33

Suggested Citation

Keloharju, Matti and Knüpfer, Samuli and Torstila, Sami, Do Retail Incentives Work in Privatizations? (October 19, 2005). EFA 2004 Maastricht Meetings Paper No. 04688. Available at SSRN: https://ssrn.com/abstract=573943 or http://dx.doi.org/10.2139/ssrn.573943

Matti Keloharju (Contact Author)

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076
Finland
+358 40 353 8043 (Phone)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Samuli Knüpfer

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.samuliknupfer.com

Research Institute of Industrial Economics (IFN)

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Sami Torstila

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland
+358 40 353 8069 (Phone)

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