Scandinavian Working Papers in Economics

SIFR Research Report Series,
Institute for Financial Research

No 23: Privatization and Stock Market Liquidity

Bernardo Bortolotti (), Frank de Jong (), Giovanna Nicodano () and Ibolya Schindele ()
Additional contact information
Bernardo Bortolotti: University of Turin and FEEM
Frank de Jong: University of Amsterdam
Giovanna Nicodano: University of Turin and FEEM
Ibolya Schindele: Norwegian School of Management

Abstract: Using panel data of 19 developed economies in the period 1985-2000, we show that share issue privatisation (SIP) strongly affects a fundamental aspect of financial development: market liquidity. First, we identify the channels through which a sustained SIP program boosts the liquidity of the overall market. Then, we explicitly test whether SIP has a positive spillover effect on the liquidity of private companies' shares. Liquidity appears to be sensitive to the amount of shares sold to retail investors, whose trading reduces the adverse selection component of the price impact. The cross-listing of shares exhibits an even stronger effect, suggesting that international offerings eliminate informational barriers and attract foreign investors to the domestic market, thereby reducing its risk premium.

Keywords: Privatization; Financial Market Development; International Finance

JEL-codes: F30; G14; L33; O16

42 pages, April 15, 2004

Full text files

sifr-wp23.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Anki Helmer ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:37:48.