Credible privatization and market sentiment: Evidence from emerging bond markets

Narjess Boubakri, Jean-Claude Cosset and Houcem Smaoui
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Narjess Boubakri: [1] HEC Montreal, Quebec, Canada[2] American University of Sharjah, United Arab Emirates
Jean-Claude Cosset: HEC Montreal, Quebec, Canada
Houcem Smaoui: King Fahd University of Petroleum and Minerals, Saudi Arabia

Journal of International Business Studies, 2009, vol. 40, issue 5, 840-858

Abstract: This paper investigates the link between privatization and emerging market sovereign bond spreads. We conjecture that the way privatization is implemented may help to build a favorable market sentiment by gradually building investor confidence, which should then lead to a lower required compensation for policy risk. Controlling for other determinants of sovereign bond spreads, we find that privatization proceeds do not affect spreads, while privatization progress and share issues reduce spreads. Journal of International Business Studies (2009) 40, 840–858. doi:10.1057/jibs.2008.100

Date: 2009
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