Do Retail Incentives Work in Privatizations?

Matti Keloharju, Sami Torstila and Knüpfer, Samuli
Authors registered in the RePEc Author Service: Samuli Knüpfer

No 4612, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 20 countries around the world have used incentive packages, including bonus shares and discounts, to attract retail investors to participate in privatizations. Using a unique dataset, we estimate the total cost of incentive packages at approximately $27 billion. The expiration of bonus share plans is associated with a six-day abnormal return of -1.1% and a long-term increase in volume. Incentives have been surprisingly effective in meeting stated privatization objectives. A dollar spent on retail incentives helps to attract about 21 times as many investors as a dollar spent on underpricing. Individual-level analysis shows that flipping is not only much reduced in the short term, but also declines by at least 15% over a period of 1,000 trading days.

Keywords: Privatization; Equity offerings; Bonus shares; Discounts; Flipping (search for similar items in EconPapers)
JEL-codes: D78 G14 G32 G38 L33 (search for similar items in EconPapers)
Date: 2004-09
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (1)

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Journal Article: Do Retail Incentives Work in Privatizations? (2008)
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