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Author
E.C. Perotti
Year
1995
Title
Credible privatization
Journal
The American Economic Review
Volume | Issue number
85 | 4
Pages (from-to)
847-859
Document type
Article
Faculty
Faculty of Economics and Business (FEB)
Institute
Amsterdam Business School Research Institute (ABS-RI)
Abstract
Privatization shifts residual income and control to private investors, restricting redistribution and improving incentives; thus rapid privatization should be desirable. Empirically, however, the transfer of ownership, as opposed to control, is very gradual. I offer an explanation based on investors' concern about future interference. A government averse to redistribution retains a passive stake in the firm; the willingness to bear residual risk signals commitment. When a large government stake conflicts with the transfer of control, underpricing may be necessary for separation. Finally, when the required discount is large, a committed government may prefer not to signal, gaining credibility over time.
Language
Undefined/Unknown
Permalink
http://hdl.handle.net/11245/1.419078

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