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Do Retail Incentives Work in Privatizations?

Do Retail Incentives Work in Privatizations? Twenty countries around the world have used $27 billion in incentives such as bonus shares and discounts to attract retail investors to participate in privatizations and to discourage them from flipping their shares. Our results show that incentives have performed well, increasing retail investor participation much more cost effectively than underpricing. Flipping is not only much reduced in the short term but remains cumulatively at least 15% lower after 1000 trading days. The expiration of bonus share plans is associated with a 6-day abnormal return of –1.0% and a long-term increase in trading volume. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Financial Studies Oxford University Press

Do Retail Incentives Work in Privatizations?

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Publisher
Oxford University Press
Copyright
© The Author 2006. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org.
ISSN
0893-9454
eISSN
1465-7368
DOI
10.1093/rfs/hhl033
Publisher site
See Article on Publisher Site

Abstract

Twenty countries around the world have used $27 billion in incentives such as bonus shares and discounts to attract retail investors to participate in privatizations and to discourage them from flipping their shares. Our results show that incentives have performed well, increasing retail investor participation much more cost effectively than underpricing. Flipping is not only much reduced in the short term but remains cumulatively at least 15% lower after 1000 trading days. The expiration of bonus share plans is associated with a 6-day abnormal return of –1.0% and a long-term increase in trading volume.

Journal

The Review of Financial StudiesOxford University Press

Published: Sep 27, 2008

Keywords: JEL Classification D78 G14 G32 G38 L33

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