Privatization, Political Risk and Stock Market Development in Emerging Economies

Enrico Perotti and Pieter van Oijen ()
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Pieter van Oijen: University of Amsterdam

No 99-033/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper investigates whether privatization in emerging economies has a significant indirect effect on local stock market development through the resolution of political risk. We argue that a sustained privatization program represents a major political test that gradually resolves uncertainty over political commitment to a market-oriented policy as well as to regulatory and private property rights. We present evidence suggesting that progress in privatization is indeed correlated with improvements in perceived political risk. Our analysis further shows that changes in political risk in general tend to have a strong effect on local stock market development and excess returns in emerging economies. We conclude that the resolution of political risk resulting from successful privatization has been an important source for the rapid growth of stock markets in emerging economies.

This discussion paper has resulted in a publication in the 'Journal of International Money and Finance' , 2001, 20(1), 43-69.

Keywords: Emerging economies; Privatization; Political risk; Stock markets (search for similar items in EconPapers)
JEL-codes: F30 G18 (search for similar items in EconPapers)
Date: 1999-05-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Privatization, political risk and stock market development in emerging economies (2001)
Working Paper: Privatisation, Political Risk and Stock Market Development in Emerging Economies (1999)
Working Paper: Privatization, Political Risk and Stock Market Development in Emerging Economies (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:19990033

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