The Impact of Privatization on Stock Market Development

153 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 2002.This dissertation examines the relationship between stock market development and the privatization of state-owned enterprises (SOE's). Many authors have asserted that privatization leads to enhanced stock market development, but few authors have explored the theoretical mechanisms through which this takes place or presented empirical evidence establishing this link. This dissertation aims to fill this absence of research Chapter 2 presents a comparative analysis of privatization in Latin America focusing on those factors which would most likely affect the development of stock markets. Chapter 3 presents a comparative analysis of stock market development in Latin America and defines several measures of capital market development. Chapter 4 examines empirically the hypothesis that privatization enhances stock market development. Using a Perron test in an ARMA model of three stock market development measures for three countries, a structural break in market capitalization is found to be associated with increased privatization activity involving Share Issue Privatization (SIP) for all three countries in the study. Using measures of liquidity (traded value and turnover), a structural break is found to lag one year behind the break in market capitalization for all three countries, but there is no evidence to support the main hypothesis. Chapter 5 presents a summary of the conclusions reached in the previous chapters, discusses policy implications, and outlines directions for future research on this topic.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD