The political economy of share issue privatization: International evidence

• I test the political underpinnings of the choice of privatization method.
• The political system's type, tenure and cohesion explain the privatization method.
• The privatization method is politically constrained at different levels.

Using a large sample of 3266 privatization transactions from 100 countries over the period 1977–2006, I test hypotheses on the political underpinnings of the choice of privatization method. After controlling for firm-level characteristics and cross-country legal institutions, I find that the political system's type, tenure, and cohesion explain the choice between privatizing with a share issue or an asset sale. My results are robust to a series of sensitivity tests and suggest that the government's choice of privatization method is politically constrained at different levels.