Credible reforms and stock return volatility: Evidence from privatization

Jean-Claude Cosset, Hyacinthe Y. Somé and Pascale Valéry

Journal of Banking & Finance, 2016, vol. 72, issue C, 99-120

Abstract: In this paper we investigate how privatization affects stock return volatility. A credible privatization builds investors’ confidence through a reduction in political risk. In particular, a privatization program that is maintained over time signals credibility, which reduces political risk and in turn volatility. We further show that privatization is associated with lower idiosyncratic volatility mainly among developed markets, while it is associated with lower systematic volatility in developing markets. Additional tests suggest that the reduction in volatility is greater when privatization sales are carried out through the stock market than through asset sales.

Keywords: Privatization; Investor's confidence; Stock return volatility; Political risk (search for similar items in EconPapers)
JEL-codes: G10 G34 G38 O10 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426616301170
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:72:y:2016:i:c:p:99-120

DOI: 10.1016/j.jbankfin.2016.07.004

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().