State Ownership, Political Institutions, and Stock Price Informativeness: Evidence from Privatization
52 Pages Posted: 7 Jan 2014 Last revised: 8 Jan 2014
Date Written: January 7, 2014
Abstract
In this paper, we examine the relation between government ownership and stock price informativeness around the world. Using a sample of privatized firms from 41 countries between 1983 and 2007, we find strong and robust evidence that state ownership is associated with lower firm-level stock price variation, i.e., stock price informativeness. Furthermore, we find that the relation between state ownership and stock price informativeness depends on political institutions. In particular, the adverse effects of state ownership on stock price informativeness are more pronounced in countries with lower political rights (i.e., lower political constraints on the government).
Keywords: Government Ownership; Political institutions; Privatization; Stock Price Informativeness
JEL Classification: G32, G38, G30, G14, G15
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