The Vouchers Privatization Process as a Price Discovery Mechanism

Elli Kraizberg

Review of Finance, 1999, vol. 3, issue 2, 175-203

Abstract: The privatization process through which governments transfer their holdings vary from one country to another. The coupon (or voucher) privatization process, which has been frequently utilized in Eastern Europe, is generally characterized by a transfer of government holdings to the public for less than their full economic value. The vouchers process in the Czech Republic, specifically, is a case in which the transfer was practically free and in which foreign participation was banned. As such, and in the absence of an actual flow of funds, the process constituted an interesting large-scale experiment of a price discovery mechanism whose empirical conclusions are inconclusive. On the one hand, the variance of the expected outcomes declines during this process, but on the other hand, the participants could obtain superior outcomes using public information, while some, who had access to private information, may performed even better. Thus, wondering whether the process in the Czech Republic served as an efficient price discovery mechanism, additional potential distortions should be investigated: (i) the specific rules of the process through which the public exchanged bidding points for shares, or (ii) the role that funds' managers played, in lieu of the potential conflict between their objective functions and those of the shareholders of these funds, and (iii) lack of uniformity in information reporting standards. Generally, a failure to discover prices may lead to inefficiency in capital markets, because of the potential distortion of relative prices. If, in fact, the process in the Czech Republic, during the ‘second wave’, in which most of the shares of over 800 companies were transferred to the private sector, did not serve as an immediate price discovery mechanism, the ‘damage’, if any, was probably not significant, since it was not associated with a massive reallocation of funds, and the market could eventually correct itself once real funds started to pour in, in reaction to post-process relative prices.

Date: 1999
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1023/A:1009837512758 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:revfin:v:3:y:1999:i:2:p:175-203.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().