Scandinavian Working Papers in Economics
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Institute for Economies in Transition, Bank of Finland BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland

No 14/2006:
A castle built on sand: The effects of mass privatization on stock market creation in transition economies

Zuzana Fungacova () and Jan Hanousek

Abstract: This paper deals with the relationship between mass privatization and stock market development in transition economies. The link is investigated empirically using a panel of data that includes most transition countries. Our results confirm the hypothesis that mass privatization exerted a negative influence on stock market functioning over the short and medium term. Further, it appears that stock markets in countries with mass privatization were initially perceived as mere byproducts of the privatization process. Such stock markets typically not only failed in their core mission of providing capital for the corporate sector, but generated negative investor sentiment and did little to catalyze economic growth.

Keywords: privatization; mass privatization; emerging stock markets; stock market; (follow links to similar papers)

JEL-Codes: G15; G28; P34; (follow links to similar papers)

31 pages, October 26, 2006

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