TO LIST OR TO MERGE? ENDOGENOUS CHOICE OF PRIVATIZATION METHODS IN A MIXED MARKET

When and how to privatize a public firm? This paper suggests that a welfare-enhancing privatization may be triggered by a negative demand shock. When the shock is relatively mild, it is optimal to privatize a public firm by means of stock market listings; when the shock is sufficiently large, a publ...

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Bibliographic Details
Published in:Japanese economic review (Oxford, England) England), 2011-12, Vol.62 (4), p.517-536
Main Authors: CAI, DAPENG, LI, JIE
Format: Article
Language:English
Subjects:
Acquisitions & mergers
Alliances
Decision analysis
Development Economics
Econometrics
Economic History
Economics
L22
L32
Macroeconomics/Monetary Economics//Financial Economics
Mergers
Microeconomics
New stock market listings
Privatization
Public companies
Public enterprises
Securities markets
Social welfare
Stock exchange
Stock market listing
Studies
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Summary:When and how to privatize a public firm? This paper suggests that a welfare-enhancing privatization may be triggered by a negative demand shock. When the shock is relatively mild, it is optimal to privatize a public firm by means of stock market listings; when the shock is sufficiently large, a public—private-firm merger becomes optimal. This paper also considers a government that cares about privatization revenues and about social welfare. It characterizes how the weight attached to privatization revenues and the improvement in production efficiency of the privatized public firm through a stock market listing may affect the government’s choices concerning privatization.
ISSN:1352-4739
1468-5876
DOI:10.1111/j.1468-5876.2010.00523.x