Share issue privatizations as financial means to political and economic ends

This study examines how political and economic factors affect the offer pri ce, share allocation, and other terms governments choose when they privatiz e state-owned enterprises via a public share offering. Using a 59 country s ample of 630 share issue privatizations (SIPs) with total proceeds of over $446 billion during the period 1977-1997, we find that governments consiste ntly underprice SIP offers, tilt their share allocation patterns to favour domestic investors, impose control restrictions on privatized firms, and ty pically use fixed-price offers rather than book building or competitive ten der offers, all to further political and economic policy objectives. (C) 19 99 Elsevier Science S.A. All rights reserved.