Testing limits to policy reversal
Subtitle: evidence from Indian privatizations
By: Siddhartha G. Dastidar, Raymond Fisman, Tarun Khanna.
Contributors: Fisman, Raymond.; Khanna, Tarun.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13427.; Working paper series (National Bureau of Economic Research) -- working paper no. 13427.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 35
Subjects: Privatization -- India -- Mathematical models
Description: We examine the effect of regime change on privatization using the 2004 election surprise in India. The pro-reform BJP was unexpectedly defeated by a less reformist coalition. Stock prices of government-controlled companies that had been slated for definite privatization by the BJP dropped by 3.5 percent relative to private firms. Surprisingly, government-controlled companies that were only under study for possible privatization fell by 7.5 percent relative to private firms. We interpret this as evidence of investor belief of policy irreversibility, where reforms may reach a stage beyond which future regimes have difficulty reversing those policies. Further analysis suggests that layoffs, combined with the privatization announcement, served as a credible commitment to the government's privatization agenda.
Notes: "September 2007."

Includes bibliographical references (p. 33-35).

Also available in PDF from the NBER World Wide Web site (www.nber.org).