Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5088241 | Journal of Banking & Finance | 2016 | 22 Pages |
Abstract
In this paper we investigate how privatization affects stock return volatility. A credible privatization builds investors' confidence through a reduction in political risk. In particular, a privatization program that is maintained over time signals credibility, which reduces political risk and in turn volatility. We further show that privatization is associated with lower idiosyncratic volatility mainly among developed markets, while it is associated with lower systematic volatility in developing markets. Additional tests suggest that the reduction in volatility is greater when privatization sales are carried out through the stock market than through asset sales.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Jean-Claude Cosset, Hyacinthe Y. Somé, Pascale Valéry,