The dynamics of privatization, the legal environment and stock market development |
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Authors: | Narjess Boubakri Olfa Hamza |
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Institution: | a HEC Montréal, 3000 Côte Sainte Catherine, Montréal, Quebec, Canada H3T 2A7 b La Caisse de dépôt et placement du Québec, Research and Investment Policy Advising, 1000 Place Jean-Paul-Riopelle, 9th floor, Montréal, Quebec, Canada H2Z 2B3 |
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Abstract: | In this paper, we examine under which conditions privatization is an effective means to develop local stock markets for a panel of 61 countries over the last twenty four years. By addressing the endogeneity between privatization and stock market development, we show for the 1980-98 period that the initial legal environment is a significant contemporary determinant of stock market development, while privatization is not. When we examine the dynamics of privatization in interaction with the legal environment, we find that privatization has a two-year-lagged effect on stock market development in emerging markets, and a one-year-lagged effect in developed countries. Results for the 1999-2003 period seem to be largely affected by the global crash that followed the Asian crisis. |
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Keywords: | G15 G18 |
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