Information Asymmetry, Share Mispricing and the Coordination Problem: Investor Portfolio Choice in Czech Voucher Privatization

Elena Yusupova

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

Abstract: Voucher privatization in the Czech Republic presented a natural experiment of the ability of investors to construct their portfolios under conditions of asymmetric information and the absence of stock market prices. This paper provides a theoretical model of an optimal portfolio choice made by the investors maximizing their expected return and at the same time solving a coordination problem in a non-cooperative game with other investors. The perception of share misvaluation and private information are endogenized. The model offers an interpretation and theoretical justification of earlier empirical findings and explains the crucial role of the auctioneer, different optimal strategies for different types of investors and the redundancy of legal limits constraining ownership stakes in firms. The results provide implications for the design of voucher privatization, which should lead to more efficient share distribution and price setting.

Keywords: Voucher privatization; Asymmetric information; Portfolio and strategic investors; Portfolio choice; Mispricing (search for similar items in EconPapers)
JEL-codes: D81 D82 G11 (search for similar items in EconPapers)
Date: 2006-07
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp301

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