TY - JOUR
T1 - Privatization and stock market liquidity
AU - Bortolotti, Bernardo
AU - de Jong, Frank
AU - Nicodano, Giovanna
AU - Schindele, Ibolya
N1 - Funding Information:
We thank Yakov Amihud, Viral Acharya, Gabriella Chiesa, Mara Faccio, Dirk Jenter, Arie Melnik, Bill Megginson, David Parker, Enrico Perotti and Alessandro Sembenelli for comments, and Utpal Bhattacharya for comments and for generously providing his data. We wish to thank participants in the meetings of AFFI, the Econometric Society and the Western Finance Association, in PFM workshops at the University of Amsterdam, City University Business School, FEEM and Paris Evry, and in seminars at Bocconi University, ICER and the University of Ljubljana. Laura Poddi provided excellent research assistance. This research has been funded by the European Commission (contract no. HPSE-CT-1990-00007).
PY - 2007/2
Y1 - 2007/2
N2 - This paper shows that share issue privatization (SIP) is a major source of domestic stock market liquidity in 19 developed economies. Particularly, privatization IPOs have a negative effect on the price impact - measured by the ratio of the absolute return on the market index to turnover. This result is robust to the inclusion of controls for other observable and unobservable factors, having also considered the endogenous nature of the decision to privatize. We also provide evidence of a positive spillover of SIP on the liquidity of private companies. This cross-asset externality is one implication of liquidity theories emphasizing the improved risk diversification opportunities and risk sharing brought about by privatization. This externality stems from both domestic privatization IPOs and cross-listings.
AB - This paper shows that share issue privatization (SIP) is a major source of domestic stock market liquidity in 19 developed economies. Particularly, privatization IPOs have a negative effect on the price impact - measured by the ratio of the absolute return on the market index to turnover. This result is robust to the inclusion of controls for other observable and unobservable factors, having also considered the endogenous nature of the decision to privatize. We also provide evidence of a positive spillover of SIP on the liquidity of private companies. This cross-asset externality is one implication of liquidity theories emphasizing the improved risk diversification opportunities and risk sharing brought about by privatization. This externality stems from both domestic privatization IPOs and cross-listings.
KW - Financial market development
KW - International finance
KW - Liquidity externality
KW - Privatization
UR - http://www.scopus.com/inward/record.url?scp=33846564925&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=33846564925&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2006.04.008
DO - 10.1016/j.jbankfin.2006.04.008
M3 - Article
AN - SCOPUS:33846564925
SN - 0378-4266
VL - 31
SP - 297
EP - 316
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 2
ER -