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Can Restructuring Gains Be Sustained Without Ownership Changes? Evidence from Withdrawn Privatizations

Published online by Cambridge University Press:  10 August 2020

Gabriele Lattanzio  and
William L. Megginson Open the ORCID record for William L. Megginson [Opens in a new window]
Gabriele Lattanzio
Affiliation:
Southern Methodist University Cox School of [email protected]
William L. Megginson*
Affiliation:
University of Oklahoma Price College of Business, and University of International Business and Economics (Beijing)[email protected]
*
[email protected] (corresponding author)
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Abstract

By employing a novel, hand-collected sample of withdrawn and completed share issue privatizations, we show that both groups undergo comparable restructuring processes over the 3 years preceding the event. We employ matching procedures to explicitly control for the restructuring effect, isolating the effect of the ownership transfer from state to private investors on corporate policies and performance. We document that, absent the ownership transfer, most of the gains realized during the restructuring process are reabsorbed over the posttreatment period. The transition from state to private ownership thus represents a necessary condition for the long-term success of privatization programs.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 4 , June 2021 , pp. 1476 - 1504
Copyright
© THE AUTHOR(S), 2020. PUBLISHED BY CAMBRIDGE UNIVERSITY PRESS ON BEHALF OF THE MICHAEL G. FOSTER SCHOOL OF BUSINESS, UNIVERSITY OF WASHINGTON

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Footnotes

We thank Amal Abeysekera, Jeff Black, Craig Brown, Espen Eckbo, Chitru Fernando, Veljko Fotak, Xuechen Gao, Halit Gonenc, Abhinav Goyal, Sergei Guriev, Scott Guernsey, Nandini Gupta (the referee), Jan Hanousek, Jarrad Harford (the editor), Pia Helbing, Kate Holland, Evzen Kocenda, Lubomir P. Litov, Bibo Liu, Deborah Lucas, Brian Lucey, Roni Michaely, Cal Muckley, Luca Picariello, Leonid Pugachev, and Henk von Eije, in addition to seminar participants at the University of Oklahoma, University of Georgia, King Fahd University of Petroleum and Minerals, European Bank for Reconstruction and Development, and conference participants and discussants at the 2017 Institute for Humane Studies Fall Graduate Students Symposium, 2018 Eastern Finance Association, 2018 Financial Engineering and Banking Society, 2018 European Financial Management Association, 2018 Finance Forum, and 2018 China Financial Research Conference, where our paper received a Best Paper Award. A previous version of this study was titled “The Political and Financial Economics of Withdrawn Privatizations.” All errors are our own.

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