DETERMINANTS OF PRIVATIZATION PRICES

Generating government revenue is a common objective in privatization. This paper asks what determines privatization prices using firm-level data for all 236 Mexican companies privatized between 1983 and 1992. T here are three main reasons why net prices-auction prices net of the c ost of prior restructuring measures-are low, averaging 54 cents per do llar of assets. First, privatization prices are very sensitive to the level of competition in the auction and restrictions often Limited par ticipation. Second, the privatization process took too long, and lengt hier privatizations are associated with lower premiums. Third, firm pr ior restructuring measures absorbed an average of 33 percent of the au ction price. Most restructuring measures do not increase price and del ay privatization further. Net prices would have increased by 71 cents per dollar of assets if the government had emphasized speed, succeedin g in divesting assets in one year less than the average, and firing th e CEO were the only restructuring step taken.