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[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index] Re: States refusal to sell
Some answers to the questions raised by Dave Wheatcroft can be found in the following paper: "From State to Market: A Survey of Empirical Studies on Privatization" BY: WILLIAM L. MEGGINSON University of Oklahoma at Norman Department of Finance JEFFRY NETTER University of Georgia Department of Banking and Finance Document: Available from the SSRN Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=158313 Paper ID: New York Stock Exchange Working Paper No. 98-05 Date: March 10, 2000 Contact: WILLIAM L. MEGGINSON Email: Mailto:wmegginson@ou.edu Postal: University of Oklahoma at Norman Department of Finance 307 West Brooks, 205A Adams Hall Norman, OK 73019-4005 USA Phone: (405)325-2058 Fax: (405)325-1957 Co-Auth: JEFFRY NETTER Email: Mailto:jnetter@terry.uga.edu Postal: University of Georgia Department of Banking and Finance 456 Brooks Hall Athens, GA 30602-6250 USA ABSTRACT: This study surveys the academic literature examining the privatization of state-owned enterprises (SOEs), with a focus on 61 empirical studies. The paper is written from the perspective of a policy-maker weighing the adoption of a national privatization program, who seeks answers to the following questions: (1) How large an impact have privatization programs actually had on state involvement in different national economies?; (2) What are the principal reasons for divestment?; (3) Have privatization programs significantly improved the operating and financial performance of the companies divested, and has this effect been different in transition and non-transition economies?; (4) What factors impact how governments select the appropriate method of selling state assets?; (5) How do governments price the SOEs they wish to sell and what buyers do they favor?; (6) Have investors who purchase the shares of privatized firms experienced positive short and long-term returns?; (7) What impact have share issue privatization programs had on the development of nation stock markets?; and (8) What role have privatization programs played in helping countries develop effective corporate governance systems? Privatization programs have reduced the average worldwide level of state ownership by roughly one-half (to less than six percent) over the past two decades, with the SOE share of national output falling especially rapidly in developing countries during the 1990s. Nations adopting large-scale privatization programs have done so for three principal reasons. First, the evidence is now conclusive that privately-owned firms outperform SOEs and empirical studies clearly show that privatization significantly (often dramatically) improves the operating and financial performance of divested firms in both transition and non-transition economies. Second, governments have raised significant revenues through the sale of SOEs, with the cumulative value of such sales reaching $1 trillion during 1999. Third, privatization is a major component in developing both capital and product markets within a country. The choice between privatization via public share offering versus through asset sales is significantly related to factors such as firm size, government fiscal condition, the degree of shareholder protection, and the degree of income inequality. Further, those countries which have chosen the mass (voucher) privatization route have done so largely out of perceived 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. While maximizing revenues by setting high offering prices for SOEs is important to governments, many trade this objective off in favor of targeting sales to preferred buyers in direct sales and allocating shares to domestic investors (particularly SOE employees) in share offerings. On average, investors who purchase shares of firms being privatized 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 holding periods. Finally, privatizations have contributed significantly to the development of national stock markets and corporate governance systems. JEL Classification: L33, P21 At 04:53 PM 8/4/2000 , you wrote: Soory I am a little behind but I am just catching up with my mail. The reasons for not selling have been well put and fully covered but I would like twist the tail if I may to add my own contribution I would like to reverse the question and say " why should the State sell?" and secondly "why does the state want to sell to Employees?" Well of course the state sells to realise the capital assetts or as critics would say "Selling the family silver" and to my mind and experience it does not matter how its done as long as they get the money The reason for selling or giving to employees what is usually a minority stake is two fold. Firstly the moral argument of ownership and secondly as a sweetner hoping to stifle opposition from the workforce and leading for a smooth passage into privatisation. A result of the involvement of employees (though I would say not an interest to the state) is that it spreads the Capital Gains of Privatisation to a much wider and interested ownership than just to the fat cats. Regards Dave Dave Wheatcroft 01246 233438 -Tel Shann Turnbull
P.O. Box 266 Woollahra, Sydney, Australia, 1350
Phone: 02 9328 7466 office; 02 9327 8487 home
Fax: 02 9327 1497 home & office. Mobile 0418 222 378
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Life long E-mail: sturnbull@mba1963.hbs.edu Alternate:sturnbull@optusnet.com.au
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