This study surveys the literature examining the privatization of state-owned enterprises (SOEs) We review the history of privatization, the theoretical and empirical evidence on the relative performance of state owned and privately owned firms, the types of privatization, if and by how much privatization has improved the performance of former SOEs in non-transition and transition countries, how investors in privatizations have fared, and the impact of privatization on the development of capital markets and corporate governance. In most settings privatization "works" in that the firms become more efficient, more profitable, and financially healthier, and reward investors.

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From State to Market: A Survey of Empirical Studies on Privatization

Politically connected CEOs, corporate governance, and Post-IPO performance of China's newly partially privatized firms

A stock market liberalization is a decision by a country's government to allow foreigners to purchase shares in that country's stock market. On average, a country's aggregate equity price index experiences abnormal returns of 3.3 percent per month in real dollar terms during an eight-month window leading up to the implementation of its initial stock market liberalization. This result is consistent with the prediction of standard international asset pricing models that stock market liberalization may reduce the liberalizing country's cost of equity capital by allowing for risk sharing between domestic and foreign agents. A stock market liberalization is a decision by a country's government to allow foreigners to purchase shares in that country's stock market. Standard international asset pricing models (JAPMs) predict that stock market liberalization may reduce the liberalizing country's cost of equity capital by allowing for risk sharing between domestic and foreign agents (Stapleton and Subrahmanyan (1977), Errunza and Losq (1985), Eun and Janakiramanan (1986), Alexander, Eun, and Janakiramanan (1987), and Stulz (1999a, 1999b)). This prediction has two important empirical implications for those emerging countries that liberalized their stock markets in the late 1980s and early 1990s. First, if stock market liberalization reduces the aggregate cost of equity capital then, holding expected future cash flows constant, we should observe an increase in a country's equity price index when the market learns that a stock market liberalization is going to occur. The second implication is

Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices

This study examined the relationships among international diversity, product diversity, and firm performance. For a sample of large American industrial multinational enterprises (MNEs), it showed a...

https://www.jstor.org/stable/pdfplus/256635.pdf

Effects of International Diversity and Product Diversity on the Performance of Multinational Firms

This study examined the relationships among international diversity, product diversity, and firm performance. For a sample of large American industrial multinational enterprises (MNEs), it showed a consistent quadratic relationship between product diversification and MNE performance but minimal performance differences across different measures of international diversity. Analysis of the interactions of international diversity and product diversity indicates a weak effect from increasing internationalization on the performance effect of product diversity.

Effects of international diversity and product diversity on the performance

This paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992. We use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures. Both unadjusted and market-adjusted results show significant increases in profitability, operating efficiency, capital investment spending, output, employment level, and dividends. We also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios. Our results are generally robust when we partition our data into various subsamples.

The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries

The purpose of this paper is to replicate Euromoney's and Institutional Investor's country risk ratings on the basis of economic and political variables. The evidence reveals that country risk ratings respond to some of the variables suggested by the theory. In particular, both the level of per capita income and propensity to invest affect positively the rating of a country. In addition, high-ranking countries are less indebted than low-ranking countries. It also appears that the ability of the model to duplicate the two country risk measures is very similar and both magazines' ratings can be replicated to a significant degree with few available economic statistics.

https://link.springer.com/content/pdf/10.1057%2Fpalgrave.jibs.8490296.pdf

The Determinants of Country Risk Ratings

Diversification strategy and capital structure of multinational corporations

This paper examines the benefits of portfolio investment in the stock markets of politically risky countries by evaluating the effects of political risk constraints on the performance of a portfolio of international stocks. We use monthly data on political risk ratings and stock returns for a sample of thirty-six countries from April 1982 to December 1991. Ex-post and ex-ante portfolio selection strategies are developed to assess the gains from international diversification. Efficient sets are derived using a quadratic programming technique. We use four ex-ante portfolio strategies whose optimal portfolio weights are those of the equally weighted portfolio, the minimum-variance portfolio the certainty-equivalence tangency portfolio and the Bayes-Stein portfolio. The empirical findings, based on the performance tests of Jobson and Korkie [1981], suggest that diversification among politically risky countries improves the risk-return characteristics of optimal portfolios. However, the most striking benefit of the inclusion of politically risk countries in an international portfolio is the reduction in overall portfolio risk.

https://www.jstor.org/stable/pdfplus/155542.pdf

Political Risk and the Benefits of International Portfolio Diversification

We examine the postprivatization performance of newly privatized firms in Asia and document how the private ownership structure evolves over time. We show that privatization leads to an increase in profitability, efficiency, and output in former state-owned firms from Asia. However, these changes are generally less significant than those reported in other developing countries (DCs). We also find that higher improvements in performance are associated with certain aspects of (1) corporate governance and (2) the economic environment. Finally, we show that governments generally do not relinquish control and private ownership concentrates over time, but by far less than what we observe elsewhere in developing countries.

Jean-Claude Cosset

Papers

The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries

The Determinants of Country Risk Ratings

Diversification strategy and capital structure of multinational corporations

Political Risk and the Benefits of International Portfolio Diversification

Privatization, corporate governance and economic environment: Firm-level evidence from Asia