ipo underpricing and flotation methods in taiwan a stochastic frontier approach adopting stochastic frontier analysis this article studies the pricing model and underpricing phenomenon of the initial public offerings ipos in taiwan and further elucidates the potential impact of offering mechanisms on underpricing the sampling period is from 1996 to 2003 in which 647 ipos are selected empirical results suggest that issuing firms with greater earning potentials less risk or less asymmetric information have lower underpricing furthermore the variables included to explain underpricing are mostly significant especially the proxy variable for flotation method observed mean ipo underpricing is 20 59 in the sample period compared to 17 12 for the subgroup using the auction method this statistically significant difference implies that the introduction of the auction method can help reduce ipo underpricing

adam smith or machiavelli political incentives for contracting out local public services why do some local governments deliver public services directly while others rely on providers from the private sector previous literature on local contracting out and on the privatization of state owned enterprises have offered two competing interpretations on why center right governments rely more on private providers some maintain that center right politicians contract out more because like adam smith they believe in market competition others claim that center right politicians use privatization in a machiavellian fashion it is used as a strategy to retain power by purchasing the electoral support of certain constituencies using a unique dataset which includes the political attitudes of over 8 000 swedish local politicians from 290 municipalities for a period of 10 years this paper tests these ideological predictions together with additional political economy factors which have been overlooked in previous studies such as the number of veto players results first indicate support for the machiavellian interpretation as contracting out increases with electoral competition second irrespective of ideological concerns municipalities with more veto players in the coalition government contract out fewer services

privatisation around the world evidence from panel data this paper presents new evidence about privatisation processes and their determinants from a panel of 34 countries over the 1977 99 period the empirical analysis shows that privatisation takes place typically in wealthy and democratic countries endowed with deep and liquid stock markets and is affected by the governing political majority and public sector budget constraints but the extent of privatisation in terms of revenues and stakes sold appears more limited in civil law countries where shareholders are poorly protected banks powerful and capital markets less developed

the effect of time pressure on consumer choice deferral this article investigates the effect of time pressure on choice deferrai recent research suggests that the likelihood of deferral is contingent on the ease of making the selection decision which option to choose as well as the overali attractiveness of the selected alternative we focus on how time pressure systematically impacts choice deferral by increasing the use of noncompensato ry decision rules in the selection decision and by increasing the relative emphasis placed on the unique features in the deferral decision whether to choose consistent with the hypotheses we find over a series of five studies that time pressure 1 decreases choice deferral when choice involves high conflict but not when conflict is low 2 reduces the impact of shared features on choice deferral and 3 decreases choice deferral for sets with common bad and unique good features approach approach conflict but not for sets with common good and unique bad features avoidance avoidance conflict we further show that greater attention to the unique features is not a general property of decision making under time pressure but rather a consequence of the primacy of the selection decision over the deferral decision consistent with this premise time pressure did not decrease the relative attention paid to common features when the task was described as purely a deferral decision the theoretical and practical implications of the findings are discussed

political and economic determinants of the likelihood of privatizing argentine public banks abstract this paper discusses the political economy of bank privatization in argentina following institutional changes related to the implementation of the convertibility plan and to the tequila crisis the empirical results strongly support the hypothesis that political incentives affect the likelihood of privatization we find 1 poorly performing banks were more likely to be privatized 2 overstaffing tended to reduce the probability of privatization 3 large banks were less likely to be privatized and 4 higher levels of provincial unemployment and higher shares of public employees reduced the probability of privatization although the hypotheses were tested for a specific industry in a specific country which makes it possible to control for enterprise performance and institutional characteristics it seems reasonable that similar results might hold in other industries and countries

prices or knowledge what drives demand for financial services in emerging markets this brief summarizes the results of a gender impact evaluation study entitled prices or knowledge what drives demand for financial services in emerging markets conducted in 2008 in indonesia the study observed that financial development is critical for growth but its micro determinants are not well understood financial literacy training has no impact on the probability of opening a bank account although it does have an impact among those with low levels of education and financial literacy a change from 3 to 14 led to a 7 6 percent increase in the probability of owning a bank account the results hold two years after a study funding for the study derived from world bank hbs division of research and faculty development

rotating savings and credit associations credit markets and efficiency this paper examines the allocative performance of rotating savings and credit associations roscas a financial institution which is observed world wide we develop a model in which individuals save for an indivisible good and study roscas which distribute funds using random allocation and bidding the allocations achieved by the two types of rosca are compared with that achieved by a credit market and with efficient allocations more generally we find that neither type of rosca is efficient and that individuals are better off with a credit market than a bidding rosca nonetheless a random rosca may sometimes yield a higher level of ex ante expected utility to prospective participants than would a credit market i introduction rotating savings and credit associations roscas are a widely observed institution for financial intermediation they are found all over the world particularly in developing countries and have heretofore received scant attention from economists this paper and its companion piece besley coate and loury 1993 constitute a first attempt to analyse their economic role and performance roscas come in two main forms the first type allocates funds randomly in a random rosca members commit to putting a fixed sum of money into a pot for each period of the rosca s life lots are drawn and the pot is randomly allocated to one of the members in the next period the process repeats itself with each previous winner excluded from the draw the process continues until each rosca member has received the pot once at this point the rosca is either disbanded or begins over again individuals may also form a bidding rosca in which the pot is allocated via a bidding procedure the individual who

getting to the top of mind how reminders increase saving we provide evidence from field experiments with three different banks that reminder messages increase commitment attainment for clients who recently opened commitment savings accounts messages that mention both savings goals and financial incentives are particularly effective whereas other content variations such as gain versus loss framing do not have significantly different effects nor do we find evidence that receiving additional late reminders has an additive effect these empirical results do not map neatly into existing models so we provide a simple model where limited attention to exceptional expenses can generate undersaving that is in turn mitigated by reminders data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2296 this paper was accepted by teck hua ho behavioral economics

privatization public offerings and political objectives this paper empirically analyses the political and economic objectives underlying privatization on the stock market particularly the factors of sips underpricing are explained and the study analyses whether the change of political parties in government play a role on the issue the paper has two main findings first larger initial returns occurred in the early stages of privatization second the change of government from left wing to right wing did not lead to significantly higher levels of underpricing the results show that governments are quite pragmatic with respect to underpricing maximizing proceeds from sips shows to be more important than ideological differences between parties in government

residual state ownership policy stability and financial performance following strategic decisions by privatizing telecoms we question previous research assuming that privatizing firm performance generally benefits from decreasing state ownership and the passage of time both of which purportedly align principal agent incentives promoting organizational decision making that increases shareholder value when state ownership shifts from majority and controlling to minority and non controlling the performance impact may be positive in the short run particularly where there is instability in the local investment policy environment consistent with this proposition we develop and test hypotheses derived from a minority and non controlling or residual state ownership framework grounded in credible privatization and institutional theory we propose that 1 residual state ownership positively affects shareholder returns after strategic decisions by privatizing firms because it signals state support for managerial initiatives 2 the passage of time since initial privatization negatively affects shareholder returns after strategic decisions by privatizing firms because initial undertakings in support of the privatizing firm are reversed and 3 home country investment policy stability moderates these two effects greater stability obviates the need for residual state ownership and slows policy reversals over time we find empirical support for our residual state ownership framework in event study analyses of cumulative abnormal returns cars associated with 196 major investments announced from 1986 to 2001 by 15 privatizing telecoms from around the world cars are positive at 5 25 state ownership levels but turn negative at higher state ownership levels cars turn sharply negative within 1 2 years from initial privatization dates increasing policy stability diminishes positive ownership and negative time effects on cars results confirm the potential supporting role that residual state ownership can play in enhancing strategic decision making and financial performance by privatizing firms particularly where there is instability in the home country investment policy environment

political pluralism public policies and organizational choices banking branch expansion in india 1948 2003 data on the expansion of 94 commercial banks in india from 1948 to 2003 were analyzed to test the proposition that political pluralism wherein competing parties control the state and national governments of a nation can promote business expansion the results confirm that such political pluralism reduces the power of either government to constrain business decision making but that pluralism might at times lead to unhealthy competition between parties harming local expansion opportunities the data show that in india banks selectively exploit political pluralism to guide their expansion decisions

determinants of privatization prices generating government revenue is a common objective in privatization this paper asks what determines privatization prices using firm level data for all 236 mexican companies privatized between 1983 and 1992 there are three main reasons why net prices auction prices net of the cost of prior restructuring measures are low averaging 54 cents per dollar of assets first privatization prices are very sensitive to the level of competition in the auction and restrictions often limited participation second the privatization process took too long and lengthier privatizations are associated with lower premiums third firm prior restructuring measures absorbed an average of 33 percent of the auction price most restructuring measures do not increase price and delay privatization further net prices would have increased by 71 cents per dollar of assets if the government had emphasized speed succeeding in divesting assets in one year less than the average and firing the ceo were the only restructuring step taken

pension plan characteristics and framing effects in employee savings behavior abstract defined contribution pensions in many postsecondary institutions are funded by a combination of an employer premium and a mandatory employee premium individuals can also contribute to a supplemental savings account holding constant total compensation standard reasoning suggests that supplemental savings should depend negatively on the sum of the employer and employee pension contributions contrarily we find that the supplementary savings of professors are significantly more sensitive to employee contributions than to employer contributions this asymmetry is consistent with different marginal propensities to save out of the salary and pension components of compensation nevertheless impacts on lifetime utility are relatively modest

finance and politics the wealth effects of special interest group influence during the nationalisation and privatisation of conrail conrail nationalised in 1976 and privatised in 1987 was the most significant nationalisation and privatisation by the us government in recent years it was created from six bankrupt railroads under the pressure of interest groups formed by customers existing claimants employees and related companies we document the gains and losses to these special interest groups at key points in the nationalised and privatised time periods over this period the us government had outlays of 6 59 billion and cash inflow of 6 15 billion and internal return of 6 4 the paper provides evidence that a state owned firm with good governance could deliver superior performance

the economics of roscas and intrahousehold resource allocation this paper investigates individual motives to participate in rotating savings and credit associations roscas detailed evidence from roscas in a kenyan slum nairobi suggests that most roscas are predominantly composed of women particularly those living in a couple and earning an independent income to explain this phenomenon we propose an argument based on conflictual interactions within the household participation in a rosca is a strategy a wife employs to protect her savings against claims by her husband for immediate consumption the empirical implications of the model are then tested using the data collected in kenya

confidence building and politics in privatization some evidence from spain abstract this paper analyzes privatization on the stock market and has two main findings first sips underpricing is consistent with the confidence building hypothesis derived from political risk under asymmetric information larger initial returns occurred in the early stages of privatization which is consistent with the hypothesis that governments use underpricing to be credible privatizators second evidence gives support to the hypothesis that explicit political motives influence the design of privatization which is affected by the political majority

toward resource independence why state owned entities become multinationals an empirical study of india s public r d laboratories in this paper we build on the standard resource dependence theory rdt and its departure suggested by vernon to offer a novel explanation for why state owned entities soes might seek a global footprint and global cash flows to achieve resource independence from other state actors in the context of soes the power use hypothesis of standard rdt can be used to analyze the dependence of soes on other state actors such as government ministries and government agencies that have ownership and control rights in the soe building on vernon we argue that the soe can break free from this power imbalance and establish resource independence from other state actors by becoming a multinational firm and or by generating global cash flows we leverage a natural experiment in india and outline both quantitative and qualitative evidence from 42 indian state owned laboratories to support this argument

the government as a shareholder a case from the united states we study a sample of u s corporations in which the federal government held 35 100 percent of the outstanding common stock for between 1 and 23 years during and following world war ii we find that although the firms experienced abnormally high turnover among corporate board members the tenure of senior management was relatively stable moreover the performance of the government owned companies was not significantly different than that of private sector firms in the same industry hence the interim government custodianship of the firms in our case does not have the effects normally attributed to government ownership

leverage dynamics and credit quality abstract we study a dynamic model of collateralized credit markets with asymmetric information which allows for a rich set of signaling strategies based on the path of debt and repayment whether credit history reveals private information about credit quality depends on the degree of uncertainty in collateral value when uncertainty is low good borrowers fully and costlessly separate by deleveraging that is borrowing a sufficiently high amount such that subsequent repayment reveals the presence of unobservable income when uncertainty is higher good borrowers pay an adverse selection cost through a higher interest rate because bad borrowers could default and asymmetric information is not always resolved

share issue privatizations as financial means to political and economic ends abstract this study examines how political and economic factors affect the offer price share allocation and other terms governments choose when they privatize state owned enterprises via a public share offering using a 59 country sample of 630 share issue privatizations sips with total proceeds of over 446 billion during the period 1977 1997 we find that governments consistently underprice sip offers tilt their share allocation patterns to favour domestic investors impose control restrictions on privatized firms and typically use fixed price offers rather than book building or competitive tender offers all to further political and economic policy objectives

roscas as financial agreements to cope with self control problems abstract we consider a model in which people with limited self control can sign binding financial agreements among themselves thereby forming coalitions we show that these financial agreements may help them to alleviate their self control problems we then demonstrate that there exists a stable structure of coalitions in which people form rotating savings and credit associations roscas we therefore provide a behavioral rationale for one of the most prevalent and puzzling financial institutions in developing countries finally we derive and discuss some empirical predictions

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

promoting competition in the presence of essential facilities this paper addresses how to use simple access pricing to promote entry in the presence of spillovers and essential facilities an inherent dilemma is that the greater the spillover the greater is the benefit of attracting good entrants but the harder it is to exclude low quality entrants because they can free ride on the quality of good entrants we show that the inability to discriminate between entrants has the effect of discouraging access prices that enable the low quality entrant to enter generates a time consistency problem and provides incentives for good quality entrants to limit their competitiveness

government ownership and corporate governance evidence from the eu the ongoing global financial crisis has led to the largest increase in state intervention since the great depression direct government ownership in publicly traded corporations has increased dramatically since 2008 how will this increase in public ownership affect the governance of these erstwhile private companies we examine the impact of government ownership on corporate governance using a sample of firms from the european union a region that is relatively familiar with active government participation our main finding is that government ownership is associated with lower governance quality we further show that while government intervention is negatively related to governance quality in civil law countries it is positively related to governance quality in common law countries finally we find that the preferential voting rights of golden shares are especially damaging to governance quality

confidence banking and strategic default abstract securitization relies on confidence as securities are tied to a particular asset or pool of assets and investors lose when the asset defaults the security issuer usually provides further coverage by promising to use the proceedings from other non securitized assets although these promises are difficult to enforce the issuer may still have incentives to strategically avoid default in order to build a reputation of holding high quality assets confidence makes securitization more dependent on the issuer s reputation than other forms of financing and more volatile to forces behind reputation concerns such as expectations about future profits

liquidation costs and capital structure abstract we investigate the relation between liquidation costs of assets and composition of capital structure for firms that reorganized under chapter 11 of the bankruptcy code firms with high liquidation costs emerge from chapter 11 with relatively low debt ratios the debt of these firms is more likely to be public and unsecured and to have less restrictive covenant terms these firms are also more likely to raise new equity capital assets with high liquidation costs thus lead firms to choose capital structures that make financial distress less likely

why do poor people co hold debt and liquid savings i examine the use of flexible savings and loan accounts offered by safesave a microfinance institution serving poor slum dwellers in dhaka bangladesh i find that 59 per cent of the clients co ho

divide et impera strategic underpricing in privatizations in several recent initial public offerings in privatization casesshares seemed to be severely underpriced in this paper weprovide a political economy explanation for this apparentunderpricing using a variant of grossmann and helpmann s 1996 model of special interest politics we demonstrate thatgovernments may raise their election chances by rationinginvestors because the resulting broader distribution of sharesmakes regulation that is favorable to the privatized firm morepopular somewhat surprisingly even revenues from theprivatization can be increased through rationing the model alsoexplains the common practice of bonus systems designed to preventinvestors from taking profits immediately

what are the headwaters of formal savings experimental evidence from sri lanka the world s poor are seeing a rapid expansion in access to formal savings accounts what is the source of savings when households are connected to a formal account we combine a high frequency panel survey spanning two and a half years with an experiment in which a sri lankan bank used mobile point of service pos terminals to collect deposits directly from households each week we find that the headwaters of formal savings lie in sacrificed leisure time households work more and improved savings options generate an increase in labour effort in both self employment and in the wage market the results suggest that the labour allocation channel is an important mechanism linking savings opportunities to income

privatization political risk and stock market development in emerging economies this paper investigates whether privatization in emerging economies has a significant indirect effect on local stock market development through the resolution of political risk we argue that a sustained privatization program represents a major political test that gradually resolves uncertainty over political commitment to a market oriented policy as well as to regulatory and private property rights we present evidence suggesting that progress in privatization is indeed correlated with improvements in perceived political risk our analysis further shows that changes in political risk in general tend to have a strong effect on local stock market development and excess returns in emerging economies we conclude that the resolution of political risk resulting from successful privatization has been an important source for the rapid growth of stock markets in emerging economies

ownership concentration in privatized firms the role of disclosure standards auditor choice and auditing infrastructure we rely on a unique data set to estimate the impact of disclosure standards and auditor related characteristics on ownership concentration in 190 privatized firms from 31 countries accounting transparency can help alleviate the agency conflict between minority investors and controlling shareholders which is evident in the extent of ownership concentration since the expropriation of corporate resources by insiders hinges on these private benefits remaining hidden after controlling for other country level and firm level determinants we find weak no evidence that extensive disclosure standards auditor choice reduce ownership concentration in contrast we provide strong robust evidence that ownership concentration is lower in countries with securities laws that specify a lower burden of proof in civil and criminal litigation against auditors consistent with ball s 2001 predictions collectively our research implies that minority investors worldwide value legal institutions that discipline auditors in the event of financial reporting failure over both the presence of a big five auditor and better disclosure standards

politicians and the ipo decision the impact of impending political promotions on ipo activity in china abstract this paper shows that incentives created by the impending turnover of local politicians can accelerate the pace of initial public offering ipo activity in certain politicized environments focusing on china we exploit a research setting where politicians are rewarded for capital market development firms rely on political connections for access to capital rent seeking behavior is rampant and the objectives of the state might not be to maximize capital market efficiency we find that the rate of exchange eligible firms engaging in an ipo temporarily increases in advance of impending political promotion events this effect holds for both state owned and non state owned entities for state owned firms the effect is strongest in those provinces where the politicians are more likely to be rewarded for market development activity for non state owned firms the temporary increase in ipo activity appears to be rationally opportunistic in nature with the effect stronger around events more likely to disrupt the firms political connections promotion period ipos underperform non promotion period ipos in terms of both future financial performance and long run stock returns have controlling shareholders who retain a larger fraction of the company and are more likely to divert proceeds away from their intended use after the offering

bookbuilding vs fixed price an analysis of competing strategies for marketing ipos we compare two mechanisms for selling ipos the fixed price method and american book building when investors have correlated information and can observe each other s subscription decisions in this environment the fixed price method is a strategy that can create cascading demand alternatively an underwriter building a book aggregates investor information into the offer price we find that bookbuilding generates higher expected proceeds but exposes the issuer to greater uncertainty and that it provides the option to sell additional shares that are not underpriced on the margin

anatomy of initial public offerings of common stock initial public offerings of common stocks ipos are typically underpriced in this paper the author develops and tests the hypothesis that underpricing serves as a form of insurance against legal liability and the associated damages to the reputations of investment bankers the empirical results based on samples of ipos that were brought to the market before and after the securities act of 1933 provide considerable support for the implicit insurance hypothesis specifically gross underpricing and market segmentation between prestigious and fringe investment bankers in originating unseasoned new issues appear to be peculiar to the post 1933 era a number of studies have documented that unseasoned common stocks typically garner large positive abnormal returns during a short period following the initial offering in his recent review of the empirical evidence on the initial returns of common stock offerings smith 36 concluded that the returns from offer price to after market price have exceeded fifteen percent his calculations did not include some of the earlier results obtained by mcdonald and fisher 23 and logue 20 when their samples are combined with those in smith s review the initial returns of unseasoned equity offerings appear even larger over seventeen percent these results imply that underwriters consistently offer the securities at substantial discounts from their values that are set in the after market in other words initial public offerings ipos appear to be underpriced what is even more puzzling is the fact that in some time periods underpricing appears to be systematically larger than in other periods ibbotson and jaffe 15 and ritter 29 have documented that during the postwar era there have been a number of periods in which the initial returns of common stocks have been extremely high ritter for example reported that the average return from the offer price to the first after market price was over forty eight percent for ipos in 1980 and 1981 1 similarly the initial returns of unseasoned issues of common stock brought to the market in 1950 1951 1961 and 1968 were unusually large these periods in which ipos were grossly underpriced are referred to as the hotissue markets why do investment bankers underprice ipos why do issuers

behavioral foundations of microcredit experimental and survey evidence from rural india microcredit is an innovative financial tool designed to reduce poverty and fix credit market imperfections we use experimental measures of time discounting and risk aversion for villagers in south india to highlight behavioral features of microcredit conditional on borrowing from any source women with present biased preferences are more likely than others to borrow through microcredit institutions microcredit contracts require loan repayments in regular fixed installments and they harness peer pressure to encourage discipline these innovations mirror mechanisms highlighted in behavioral approaches to saving suggesting that microcredit s popularity stems partly from modes of encouragement and self discipline absent in typical lending mechanisms

economic performance through time prize lecture to the memory of alfred nobel december 9 1993 this abstract was borrowed from another version of this item

the financial and operating performance of privatized firms during the 1990s this study compares the pre and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996 we document significant increases in profitability output operating efficiency and dividend payments and significant decreases in leverage ratios for our full sample of firms after privatization and for most subsamples examined capital expenditures increase significantly in absolute terms but not relative to sales employment declines but insignificantly combined with results from two previous directly comparable studies these findings strongly suggest that privatization yields significant performance improvements during the past two decades the privatization of state owned enterprises has moved from being a radical almost desperate policy initiative of the thatcher government in britain to being an accepted economic policy for governments of all ideological stripes according to gibbon 1998 860 billion has been raised by governments worldwide through privatizations with the bulk of this total coming since 1987 and at least one commentator roche 1996 predicts that no less than 6 trillion will be raised through privatizations over the next two decades in 1997 alone sales of public enterprises totaled a record 161 billion worldwide with more than 110 billion of the total coming during the second half of the year and 1998 s total of almost 140 billion indicates that the pace shows no sign of slackening as we approach a new millennium

prompting microfinance borrowers to save a field experiment from guatemala abstractcan microfinance borrowers use the discipline of regular loan repayments in order to accumulate savings if prompted to do so in an experiment we offered commercial savings products to the microfinance borrowers of guatemala s largest public sector bank we find that giving these borrowers the opportunity to develop a savings plan and be reminded of saving at the time of loan repayment caused no increase in the opening of savings accounts but led to balances among savers that were two and a half times those in the control a second treatment arm that proposed a default savings contribution of 10 of the loan payment caused the fraction of clients using linked savings accounts to double as well as elevated deposits among savers leading to final savings balances that were more than five times the control the savings treatments also generate faster pay down of debt and weakly better overall repayment performance suggesting that simultaneous saving and borrowing can be complementary activities a

the missing shock the macroeconomic impact of british privatizations in this paper the impact of privatization on macroeconomic performance in the united kingdom is tested using quarterly data from 1979 to 1999 privatization proceeds have been included in a simple analytical framework dealing with both demand and supply side of the economy multivariate cointegration techniques have been used in order to consider the nonstationarity of the time series involved the empirical results show that privatizations have no long run effects on output in the uk this result is consistent with microeconomic evidence that shows that in the uk ownership change per se had little impact on long term productivity trends moreover it is found that privatization proceeds have contributed to sustaining public expenditures

the performance of privatized firms in the czech republic abstract with the growing importance of privatizations as a part of government policy most empirical studies of these privatizations conclude that firm performance immediately improves following privatization privatization has been the most important part of the transition from the centrally planned economies of central and eastern europe and has a larger impact on those economies than privatizations in other countries however few studies have looked at the performance of firms following mass privatization this study uses 453 separate firms 101 firms privatized in both waves for a total of 554 observations in the first and second waves of czech voucher privatization using methodology from previous studies we find that while the overall effects from privatization are positive the effects vary by privatization wave size and industry firms privatized in the first wave performed worse decline in performance following privatization than firms privatized in the second wave we also fail to find ownership concentration or debt as an important factor in restructuring the firm i believe that the results are consistent with two hypotheses first economic and political structure surrounding the privatization waves plays an important part in the success of privatization stable environments both political and economic help privatized firms restructure and improve operating performance as well as attract foreign investors and capital even in less developed countries but in transitional economies undergoing mass privatization in rapidly changing and developing economic and political environments hinder firms from restructuring and improving performance following privatization results are also consistent with the hypothesis that firms with a longer preparation period prior to privatization an implicit seasoning improve performance following privatization

choice and procrastination author s o donoghue ted rabin matthew abstract recent models of procrastination due to self control problems assume that a procrastinator considers just one option and is unaware of her self control problems we develop a model where a person chooses from a menu of options and is partially aware of her self control problems this menu model replicates earlier results and generates new ones a person might forego completing an attractive option because she plans to complete a more attractive but never to be completed option hence providing a non procrastinator additional options can induce procrastination and a person may procrastinate worse pursuing important goals than unimportant ones

dynamic debt runs we develop a dynamic model of debt runs on a rm which invests in an illiquid asset by rolling over staggered short term debt contracts i e dierent contracts mature at dierent times we derive a unique threshold equilibrium in which creditors coordinate their asynchronous rollover decisions based on the rm s publicly observable and time varying fundamental the coordination problem ampli es the creditors concerns about the rm s future rollover risk created by its time varying fundamental and causes each maturing creditor to run ahead of others even when the current fundamental is substantially higher than its liability our model provides a set of implications on the roles played by volatility illiquidity and debt maturity in driving debt runs as well as on rms capital adequacy standards and credit risk

partial privatization and firm performance most privatization programs begin with a period of partial privatization in which only non controlling shares of firms are sold on the stock market since management control is not transferred to private owners it is widely contended that partial privatization has little impact this perspective ignores the role that the stock market can play in monitoring and rewarding managerial performance even when the government remains the controlling owner using data on indian state owned enterprises we find that partial privatization has a positive impact on profitability productivity and investment widespread privatization in recent decades has generated a large empirical literature concerning the effect of ownership on firm performance most studies find that privatization has a positive impact on the profitability and efficiency of firms see megginson and netter 2001 for a recent survey 1 the firms in these studies have had a majority of their assets privatized and control rights have been transferred from the government to private owners surprisingly little is known about the effect of partial privatization where the government remains the controlling owner this paper seeks to address this gap in the literature by investigating whether the performance of state owned enterprises in india is affected by the sale of non controlling equity stakes on the stock market

barriers to formal saving micro and macroeconomic effects this paper examines different barriers to formal saving considering various interventions and their possible effects at microeconomic and macroeconomic levels it presents a comprehensive review of the literature based on a detailed classification of the barriers associated with supply side factors related to access to financial products and demand side barriers related to the use and frequency of use of those products the paper concludes that this classification and analysis contributes to a fuller understanding of the question of financial inclusion and how to achieve it

pretending to be poor borrowing to escape forced solidarity in cameroon abstractfrom field observations of credit cooperatives in cameroon we find that 19 of the loans taken are fully collateralized by savings held in the same institutions this behavior is costly to the borrower as it represents a net interest payment of about 24 per year while traditional explanations may partly explain this behavior interviews with members of the cooperatives suggest the following new rationale members resort to borrowing to signal to friends and relatives that they are poor and do not have savings available by doing so they can avoid requests for financial help we develop a signaling model to analyze the conditions under which this behavior is an equilibrium outcome

a theory of privatisation public enterprises around the world have proved to be highly inefficient primarily because they pursue strategies such as excess employment that satisfy the political objectives of politicians who control them privatization of public enterprises can raise the cost to politicians of influencing them since subsidies to private firms necessary to force them to remain inefficient are politically harder to sustain than wasted profits of the state firms in this way privatization leads to efficient restructuring of firms moreover privatization is more effective when combined with a tight monetary policy and when the new owners of firms are profit maximizing investors rather than their employees or even managers copyright 1996 by royal economic society

abnormal returns of uk privatizations from underpricing to outperformance this paper offers a review and discussion of the evidence concerning the underpricing and long run performance of british pipos privatization initial public offerings between 1977 and 1996 i e from the first privatization under a labour government british petroleum until the last ones by a conservative government railtrack more recent years are excluded because the change of government the introduction of a windfall tax on excess profits of regulated utilities and changes in the regulatory regime mark a totally different landscape compared with the previous twenty years evidence is found that underpricing was not followed by underperformance as is usually observed with ipos but rather strong outperformance this trend is decomposed by subgroups within a 55 observations sample and it is concluded that lax regulation was probably the main driving force of abnormal returns of british pipos

bank lending and initial public offerings abstract in this paper we test the hypothesis that banking relations are a signal about firm value we argue that bank processing of asymmetric information and external monitoring of corporate activities reduce the ex ante uncertainty of investors about firm value we demonstrate that the existence of bank debt and or lines of credit lowers the expected initial return associated with initial public offerings the empirical results are robust with respect to the inclusion of variables which reflect other mechanisms that can ameliorate ex ante uncertainty our work adds to the body of evidence that supports the hypothesis that intermediaries provide valuable asset services to corporate borrowers

privatization as an agency problem auctions versus private negotiations abstract this paper investigates the design of privatization mechanisms in emerging market economies characterized by political constraints that limit the set of viable privatization options our objective is to explain the striking diversity of mechanisms observed in practice and the frequent use of an apparently sub optimal privatization mechanism private negotiations we develop a simple model in which privatization is to be carried out by a government agent who plays favorites among bidders but is potentially disciplined by losing his private benefits of staying in office if the political environment is such that the privatization agent himself aims at raising the fair value for the company then privatization auctions and private negotiations are equally successful in raising public revenues if however political considerations distort the agent s incentives it may be that a seemingly transparent auction will raise less revenue than opaque private negotiations we also show that information disclosure laws may have negative welfare implications they may help the privatization agent to collude with some of the bidders to the disadvantage of non colluding bidders

a simple test of baron s model of ipo underpricing abstract this paper tests baron s 1982 model of initial public offering ipo underpricing that model relies on information asymmetries between issuers and underwriters and predicts that offer prices will be lower than would prevail in the absence of asymmetric information we examine the initial public offerings of 38 investment banks that went public in the period 1970 1987 and participated in the distribution of their own securities we find that contrary to the implication of baron s model such self marketed offerings are characterized by statistically significant underpricing comparable to that of other ipos

political connections and the process of going public evidence from china abstract we examine how political connections impact the process of going public specifically we test how political connections impact the pricing of the newly offered shares the magnitude of underpricing and the fixed cost of going public based on the experience of the newly public firms from chinese security markets and using multiple measures of political connections we find robust evidence that the issuing firms with political connections reap significant preferential benefits in the process of going public to be specific we find that firms irrespective of their ownership status with greater political connections have relatively higher offering price lower underpricing and lower fixed costs during the going public process

do privatized banks in middle and low income countries perform better than rival banks an intra industry analysis of bank privatization abstract this paper presents a comprehensive analysis of the pre and post privatization operating performance and stock market performance of privatized banks and their rivals in middle and low income countries first we find that privatization announcements elicit negative abnormal returns for rival banks the effects are more pronounced for subsequent tranche sales where the proportion of government ownership in the privatized bank is reduced second we observe that the privatized banks underperformed the benchmark index in the long run investors who bought shares of the privatized banks on the first day of trading and held them for 5 years instead of investing in the market index lost 24 of their wealth the underperformance is consistent with the negative long run returns that have been documented for initial public offerings third we document marginal improvements in the post privatization operating performance of the privatized banks though the privatized banks in middle and low income countries are better capitalized than rival banks they carry higher problem loans and are overstaffed relative to other private banks in the post privatization period since most of the sample firms are partially privatized we submit that perhaps the continued government ownership of the privatized banks might have hindered managers ability to restructure the firms

the flotation of companies on the stock market abstract in some countries the size of the stock market and the number of listed companies have persistently lagged behind the growth of the economy trading externalities can help explain this fact an entrepreneur who goes public increases risk sharing opportunities for others this externality can lead to an inefficiently low number of listed companies and also generate multiple equilibria when flotation decisions are positively correlated across entrepreneurs this happens if these face borrowing constraints and lack liquidity and thus cannot diversify their portfolios unless they go public it also happens if trading shares is costly so that a sufficient number of issues must be listed to lure investors into the market

macropolicies in transition to a market economy a three year perspective countries in transition to market economies have had to implement macroeconoimic stabilization programs at the same time that they were engaged in massive changes of their political institutions and the systemic framework of their economies what has been the interaction of stabilization with economic liberalization and deep institutional reform in the countries of eastern europe in particular the relations among initial conditions political developments reform strategies and outcomes experience in eastern europe suggests that when there is a political breakthrough as in the countries under review a radical stabilization liberalization stragety is probably the least risky approach to reform and will not constrain output or structural reform over the medium term even stabilization that is initially successful in containing inflation will later come under pressure because of social policies and the structural transitions impelled by reform several factors are identified that affect the credibility of reforms and lessons are derived for countries that have stabilized and those that yet face this task

tying odysseus to the mast evidence from a commitment savings product in the philippines we designed a commitment savings product for a philippine bank and implemented it using a randomized control methodology the savings product was intended for individuals who want to commit now to restrict access to their savings and who were sophisticated enough to engage in such a mechanism we conducted a baseline survey on 1777 existing or former clients of a bank one month later we offered the commitment product to a randomly chosen subset of 710 clients 202 28 4 percent accepted the offer and opened the account in the baseline survey we asked hypothetical time discounting questions women who exhibited a lower discount rate for future relative to current trade offs and hence potentially have a preference for commitment were indeed significantly more likely to open the commitment savings account after twelve months average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group we conclude that the savings response represents a lasting change in savings and not merely a short term response to a new product

the financial and operating performance of newly privatized firms evidence from developing countries 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

public offerings of state owned and privately owned enterprises an international comparison we compare initial offer prices in privatizations to initial prices in public offerings of private companies the evidence indicates that government officials in the united kingdom underprice ipos significantly more than their private company counterparts in canada and malaysia however the opposite is true there does not appear to be a general tendency for privatizations to be underpriced to a greater degree than private company ipos we provide additional evidence on the determinants of privatization initial returns our findings indicate that initial returns are significantly higher in relatively primitive capital markets and for privatized companies in regulated industries

gender segmentation at work in china s privatized rural industry some evidence from shandong and jiangsu abstract in this paper we argue that labor segmentation exists along gender lines in the newly privatized township and village enterprises in rural china the results based upon surveys of workers enterprise managers and local officials indicate that women are segregated into production type jobs in certain industries have less control over their work do not receive a return to experience and are adversely affected by wage discrimination there is a clear gender bias in favor of men in share holding a new and important form of workplace benefit that confers wealth and affects control within the workplace and thus privatization has contributed to gender segmentation the results support the general argument that the process of economic transition is not gender neutral

100 bills on the sidewalk suboptimal investment in 401 k plans we identify employees at seven companies whose 401 k investment choices are dominated because they are contributing less than the employer matching contribution threshold despite being vested in their match and being able to make penalty free 401 k withdrawals for any reason because they are older than 59 at the average firm 36 of match eligible employees over 59 forego arbitrage profits that average 1 6 of their annual pay or 507 a survey educating employees about the free lunch they are foregoing raised contribution rates by a statistically insignificant 0 67 percent of income among those completing the survey

venture capitalist certification in initial public offerings this paper provides support for the certification role of venture capitalists in initial public offerings consistent with the certification hypothesis a comparison of venture capital backed ipos with a control sample of nonventure capital backed ipos from 1983 through 1987 matched as closely as possible by industry and offering size indicates that venture capital backing results in significantly lower initial returns and gross spreads in effect the presence of venture capitalists in the issuing firms serves to lower the total costs of going public and to maximize the net proceeds to the offering firm in addition we document that venture capitalists retain a significant portion of their holdings in the firm after the ipo the ability of third party specialists to certify the value of securities issued by relatively unknown firms in capital markets that are characterized by asymmetric information between corporate insiders and public investors has attracted much academic interest in recent years several authors including james 1990 blackwell marr and spivey 1990 and barry muscarella peavy and vetsuypens 1991 have developed and tested models based at least in part on the formal certification hypothesis presented in booth and smith 1986 a related body of work represented by deangelo 1981 beatty and ritter 1986 titman and trueman 1986 johnson and miller 1988 carter 1990 simon 1990 and carter and manaster 1990 has examined how investment bankers and auditors help resolve the asymmetric information inherent in the initial public offering ipo process in this paper we examine whether the presence of venture capitalists as investors in a firm going public can certify that the offering price of the issue reflects all available and relevant inside information we hypothesize that venture capitalists can perform this function that it will be an economically

the costs of going public abstract this paper presents evidence regarding the two quantifiable components of the costs of going public direct expenses and underpricing together these costs average 21 22 of the realized market value of the securities issued for firm commitment offers and 31 87 for best efforts offers for a given size offer the direct expenses are of the same order of magnitude for both contract types but the underpricing is greater for best efforts offers an explanation of why some firms choose to use best efforts offers in spite of their apparent higher total costs is given

corporate governance and equity prices evidence from the czech and slovak republics the 1992 czechoslavakia mass privatization program involving about 1 500 eneterprises and implemented through a voucher scheme with competitive bidding was a bold step in changing the ownership and governance of a large part of the economy it represents a clear test case of one approach and other countries may benefit from its lessons at the time much skepticisism was voiced about mass privatization it would lead to diffuse ownership and no effective corporate governance would result but innovative forces led to the emergence of investment funds that collected much of the individuals voucher points leading to a much more concentrated ownership structure it has been expected that this concentrated ownership would lead to improved corporate governance but the jury is still out so far only limited and largely anecdotal evidence is available on the impact investment funds have on the way firms are being managed too little time has passed and too many shocks have occurred for example the split of the czech and slovak republics to expect to find discernible changes in corporate governance on measures of actual firm performance an alternative approach is to investigate whether firms that ended up with more concentrated ownership and possibly improved governance sell for higher prices either in the last voucher round or in the secondary market since then in a forward looking financial market one can expect prices to incorporate the effects of better ownership on future firm performance and associated dividends to shareholders put differently one would expect that two firms with different shareholding structures but otherwise identical would trade at different prices with the firm with a more concentrated ownership and presumably better corporate governance trading at a higher price on a cross sectional basis ownership structure may thus be significant in explaining relative share prices the author explores this line of reasoning controlling for a number of firm and sector specific variables he finds 1 majority ownership by a domestic or foreign investor has a positive influence on firm prices 2 firms with many small owners have lower prices 3 ownership by many small scale investors makes it easier for any single investor to establish effective control but such control does not necessarily translate into higher prices the author also provides two possible explanations of why higher prices appear to be associated only with majority ownership by a single investor he finds 1 the corporate legal framework and the difficulty in collecting proxy votes in the czech and slovak republics may prevent a small investor from making the necessary changes in the way firms are managed thus keeping prices low and 2 commercial banks are both managers of invesment funds and creditors of individual firms funds managers may face conflicts of interest and not be interested in increasing the value of equity alone but also the value of credits this could explain why prices are relatively lower for those firms in which investment funds have effective control

are land reforms granting complete property rights politically risky electoral outcomes of mexico s certification program abstract what is the impact on voting behavior of strengthening property rights over agricultural land to answer this question we use the 14 year nationwide rollout of mexico s land certification program procede and match affected communities ejidos before and after the change in property rights with voting outcomes in corresponding electoral sections across six federal election cycles we find that in accordance with the investor class theory granting complete property rights induced a conservative shift toward the pro market party equal to 6 8 percent of its average share of votes over the period this shift was strongest where vested interests created larger expected benefits from market oriented policies as opposed to public transfer policies we also find that beneficiaries failed to reciprocate through votes for the benefactor party we conclude that in the mexican experience engaging in a land reform that strengthened individual property rights over agricultural land was politically advantageous for the right wing party