Building a Castle on Sand: Effects of Mass Privatization on Capital Market Creation in Transition Economies

Zuzana Fungáčová

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: In this paper we study the relationship between mass privatization and capital market development in the transition economies. The link is investigated empirically using a panel of data which includes most of the transition countries. Our results confirm the hypothesis that mass privatization exerted a negative influence on capital market functioning in the short and medium term. Results further indicate that in countries with mass privatization, the capital market was established and perceived only as a byproduct of the privatization process and did not serve as a source of capital for the corporate sector. This non-transparent market of thousands of securities caused negative investor sentiment and thus did not contribute to initiating economic growth.

Keywords: Privatization; mass privatization; emerging capital markets; capital market. (search for similar items in EconPapers)
JEL-codes: G15 G28 P34 (search for similar items in EconPapers)
Date: 2005-04
New Economics Papers: this item is included in nep-eec, nep-fin, nep-fmk, nep-pbe and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp256

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