{"title":"Credible Reforms and Stock Return Volatility: Evidence from Privatization","authors":"J. Cosset, Hyacinthe Y. Somé, Pascale Valéry","doi":"10.2139/ssrn.2312499","DOIUrl":null,"url":null,"abstract":"In this paper we investigate how privatization affects stock return volatility. We show that privatization is related to volatility via political risk. In particular, a privatization program that is maintained over time signals credibility, which reduces political risk and in turn volatility. We further show that privatization is associated with lower idiosyncratic volatility mainly among developed markets, while it is associated with lower systematic volatility in developing markets. Additional tests suggest that the reduction in volatility is greater when privatization sales are carried out through the stock market than when they are carried out through asset sales.","PeriodicalId":375382,"journal":{"name":"26th Australasian Finance & Banking Conference 2013 (Archive)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2013-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"6","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"26th Australasian Finance & Banking Conference 2013 (Archive)","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.2312499","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 6
Abstract
In this paper we investigate how privatization affects stock return volatility. We show that privatization is related to volatility via political risk. In particular, a privatization program that is maintained over time signals credibility, which reduces political risk and in turn volatility. We further show that privatization is associated with lower idiosyncratic volatility mainly among developed markets, while it is associated with lower systematic volatility in developing markets. Additional tests suggest that the reduction in volatility is greater when privatization sales are carried out through the stock market than when they are carried out through asset sales.