The Structure of Privatization Plans

Abstract

In the last decade, large-scale privatization programs have transformed the structure of corporate ownership in many countries, and are a major cause of the development of their capital markets. They have contributed to nondebt financing of the public deficit, attracted foreign capital and technology, and promoted the return of flight capital. Finally, the large task of privatization of state-owned enterprises in Eastern Europe has proven to be one of the most difficult in the transition to a market economy. This paper examines the history of large-scale privatization plans in several countries, and offers some revealing insight on the strategy used by governments to achieve large sales on the capital markets. Our results are relevant for investment bankers involved in advising governments on privatization sales, for institutions interested in assessing the risk of portfolio investment in emerging economies, and for potential joint-venture investors in former state-owned enterprises. We document remarkable similarities across different sale programs. Firms are typically sold gradually, even when control is transferred rapidly. Sales of utilities tend to be more gradual than for manufacturing firms in competitive markets. The form of the sale is usually a fixed-price offer, which is often heavily underpriced. We compare a popular interpretation of gradual sales, namely limited market capacity, with a confidence- building rationale. Partial sales are usually seen as a necessity dictated by the size of privatization programs relative to the existing public equity market. The argument is that rapid sales may swamp the market and depress sale prices. However, capital markets are by definition forward-looking; thus, their current size is a misleading indicator of their potential capacity, particularly as privatization tends to take place alongside a general reform process which emphasizes markets and restores confidence in the domestic economy. However, a reform process may be subsequently reversed under pressure by entrenched interest groups; thus investment in a privatized firm is exposed to the fisk of future adverse policy changes. A privatizing government must therefore overcome investors' diffidence about its regulatory and trade policy after the sale. In order to maximize proceeds, a government may retain a stake in the firm for some time (provided managerial control is transferred immediately). This willingness to bear part of the Policy fisk will lead to higher confidence and sale prices. The progress of sales may accelerate overtime as the policy credibility of reform becomes established. Similarly, early sales may be deliberately underpriced in order to convince the market to absorb larger sales. Although the two explanations have similar empirical implications, we identify several features of sale programs which appear to be consistent with the reputation-building hypothesis rather than with the notion of temporary market capacity constraints. The risk of adverse policy changes is likely to be particularly serious for firms with large fixed investment programs which operate as natural monopolies, such as utilities, or for protected manufacturers. The evidence indicates that sales of such policy-sensitive firms tend to be more gradual and exhibit larger underpricing. In the literature on initial public offerings (IPOs), a very gradual sale structure with large underpricing is optimal when the seller has superior information over the value of the firm. However, a government is not likely to know more than private investors about asset values. Moreover, most of these firms are large, well-known utilities with stable profitability and limited competition. We conclude that the main source of uncertainty in these cases concerns future regulatory policy. In contrast, complete sales are usually associated with manufacturing firms in competitive markets. Moreover, underpricing is, on average, greater in privatization sales (and particularly so for oligopolistic firms) than in the sale of private firms. The market capacity view does not distinguish between a sequence of complete sales and a program of staggered partial sales of comparable size. The evidence suggests that governments prefer to sell stakes in several firms simultaneously as opposed to sequencing complete sales, presumably building credibility over different industries at the same time. Moreover, a common feature of all programs is that the time profile of privatization proceeds tend to increase rapidly. This is inconsistent with a fixed capacity constraint, but can be rationalized as indicating a gradual buildup in investors' confidence. Finally, the fact that larger initial sales become more common over time suggests21620120519971997Evaluatiecommissie Wet milieubeheer: koplopers lijden onder een strak vergunningenregime25124032414uva/uba/fdr1240091020210;1;01;21122100;;;08;01;01-09-197721630220519961996De wet milieubeheer toegelicht: wegwijzer bij de uitvoering van de wet milieubeheer67uva/uba/fdrAmsterdamNederlands Instituut voor Arbeidsomstandigheden NIA9063651228Milieuwetgeving1204071020210;1;01;21122100;;;08;01;01-09-19771021398;1;01;21122100;;;08;01;01-10-198721640320519961996Handhaving en aansprakelijkheid67uva/uba/fdr's-GravenhageDelwelMilieuvoorschriften1204111020210;1;01;21122100;;;08;01;01-09-1977Aalders;;M.V.C.;dr.Acht;van;R.;Hommes;;J.;21650320520012001Valuation of strategic growth optionsuva/uba/feb/absCambridge, MAThe MIT press0-262-19446-5Real options and investment under uncertainty : classical readings and recent contributionsbron: CV van dhr. Perotti onder 'Book chapters ...'119954Kulatilaka;;N.;;1002206;1;04;24203020;;;02;01;20-03-1994Schwartz;;E.S. ;Trigeorgis;;L.;21660320520032003Building infrastructure for Dutch question answeringuva/uba/fnwi/iiProceedings DIR 20031237441048521;1;02;23002100;23141400;;04;01;01-04-2002Mishne;;G.A.;;1021171;1;99;23999999;;;99;99;01-01-1994Vries;de;A.P.;We report on the construction of the first-ever open domain question answering system for the Dutch language. In addition to providing experimental results based on the CLEF 2003 QA test set for Dutch, we also identify a number of key natural language processing resources that are needed to further question answering for Dutch.21670220519881988De ambiance van het recht74uva/uba/fdrAmsterdamDuizend & Een90713460641233631021253;1;01;21121300;;;03;01;01-09-198021680120519841984Om- en terugkeer van de eigendom25119714332931uva/uba/fdr1233611021253;1;01;21121300;;;03;01;01-09-198021690320520032003Preprocessing documents to answer Dutch questionsuva/uba/fnwi/iiProceedings BNAIC'031237471048521;1;02;23002100;23141400;;04;01;01-04-2002Mishne;;G.A.;;1021171;1;99;23999999;;;99;99;01-01-1994We describe a framework for offline extraction of certain types of information from a document collection, and discuss its usage for answering factoid questions. We implemented this approach as a part of the Dutch Question Answering System developed at the University of Amsterdam. The evaluation of the system using data from the CLEF 2003 Question Answering track shows that our strategy yields a significant improvement in the performance of our overall system.21700320520032003Model checking for hybrid logicsuva/uba/fnwi/iiProceedings M4M-3123749Franceschet;;M.;Dr;1021171;1;99;23999999;;;99;99;01-01-199421710120520022002Field-induced magnetic structures in UNiGe31452074suppl.1757759uva/uba/fnwi/wzi1207851003358;1;01;23969900;;;03;01;01-05-1992Prokes;;K.;dr.;Nakotte;;H.;dr.;Châtel;de;P.F.;prof. dr.;Sechovsky;;V.;dr.;Below TN=50 K, UNiGe exhibits incommensurate (INC) antiferromagnetic (AF) order with an additional order-order (AF) phase transition at TM=42.5 K. The ground-state AF structure is characterized by a propagation vector (0,1/2,1/2). At 4.2 K, there are two field-induced transitions at 17 and 25 T for the b-axis and at 3 and 10 T for fields along c. No transitions are observed for the a�B orientation up to 38 T. While the intermediate field-induced phases for both b�B and c�B geometries have propagation vector (0,1/3,1/3), the INC structure is characterized by a propagation vector (0,'1, '2). All phases have a non-collinear arrangement of U moments with all three components, i.e. also along the a-axis, which is the hard-magnetization direction. The field-forced ferromagnetic phase, which is established for c�B above 10 T still exhibits a significant a-axis component. This suggests that the magnetic ordering in UNiGe is governed by anisotropic exchange interactions.21720320519981998Gedragsgeoriënteerde gezinsbehandeling176197uva/uba/fmg/psychHoutenBohn Stafleu van LoghumMethoden en technieken van gedragstherapie bij kinderen en jeugdigen1715051001692;1;01;94002000;;;02;01;01-01-1965Prins;;P.J.M.;Bosch;;J.D.;21730320519891989De behandeling van kinderen en adolescenten met behulp van directieve gezinstherapieuva/uba/fmg/psychLisseSwets & ZeitlingerKind op het spoor: Opstellen uit de klinische kinder-en jeugdpsychotherapie1866491001692;1;01;94002000;;;02;01;01-01-1965Prins;;P.;Wit;de;C.;21740120520042004Reducing Aggressive Behavior in Boys With a Social Cognitive Group Treatment: Results of a Randomized, Controlled Trial.291556431214781487uva/uba/fmg/psych145823Manen;van;T.G.;;1002296;1;01;94002000;;;02;01;01-10-19761010619;1;01;94002000;;;01;01;15-09-1996Objective: To evaluate the effectiveness of a social cognitive intervention program for Dutch aggressive boys and to compare it with a social skills training and a waitlist control group. Method: A randomized, controlled treatment outcome study with 97 aggressive boys (aged 9-13 years) was presented. An 11-session group treatment, a social cognitive intervention program (n = 42) based on Dodge's social information-processing theory, was compared with social skills training (n = 40) and waitlist control group (n = 15). Measures of aggressive behavior, self-control, social cognitive skills, and appropriate soci

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