Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154955
Authors: 
Megginson, William L.
Netter, Jeffry M.
Year of Publication: 
1999
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 1.1999
Abstract: 
This study surveys the academic and professional literature examining the privatisation of state-owned enterprises (SOEs), with a focus on empirical studies. Privatisation has been instrumental in reducing state ownership in many countries and had a transforming effect on global stock markets, although the role of SOEs in many other countries is similar to what it was two decades ago. Countries have adopted large-scale privatisation programs primarily for two reasons: first, the conclusive evidence that privately-owned firms outperform SOEs and, second, the empirical evidence clearly shows that privatisation significantly (often dramatically) improves the operating and financial performance of divested firms. Governments can also raise significant revenues by selling SOEs. While the choice between privatisation via public share offering versus through asset sales is still imperfectly understood, factors such as firm size, government fiscal condition, and the state of national economic development are important influences. Further, those countries which have chosen the mass (voucher) privatisation route have done so largely out of necessity--and face ongoing efficiency problems as a result. Governments have great discretion in pricing the SOEs they sell, especially those being sold via public share offering, and they use this discretion to pursue political and economic ends. Finally, investors who purchase the shares of firms being privatised earn significantly positive excess returns both in the short-run (due to deliberate underpricing of share issues by the government) and over one, three, and five-year investment horizons.
Subjects: 
Capital
Investment
Employment
Financing policy
Ownership structure
Investment banking
Venture capital
Brokerage
Public economics
Sources of revenue
Public enterprises
Boundaries of public and private enterprise
Privatisation
Contracting out
JEL: 
E22
E24
G32
G24
H27
L32
L33
Document Type: 
Working Paper

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