- Title
- The long-run efficiency gains in public-to-private transfers: new evidence from earnings announcements
- Creator
- Docherty, Paul; Easton, Steve
- Relation
- Journal of Banking and Finance - Law and Practice Vol. 26, Issue 4, p. 227-239
- Relation
- http://legal.thomsonreuters.com.au/journal-of-banking-and-finance-law-and-practice-online/productdetail/97176
- Publisher
- Lawbook
- Resource Type
- journal article
- Date
- 2015
- Description
- There is ongoing debate with regards to the efficacy of the privatisation of government assets. This article contributes to this debate from an economic perspective by asking two questions. First, do Australian governments systematically under (or over) price assets when they are privatised and secondly, are these assets operated more efficiently in private hands.The authors report that privatised initial public offerings yield statistically and economically significant positive abnormal returns both on their listing day and over the five years post-listing. These positive returns indicate that governments privatise assets for less than their market values. The authors examine whether long-run efficiency gains are generated post-privatisation by adopting the novel approach of using short-run returns around earnings announcements to measure efficiency gains – a methodology not affected by problems associated with long-run returns estimation. Consistent with theoretical predictions of efficiency gains in public-to-private transfers, the average earnings announcement-day returns for these firms are significantly positive. The results yield important implications for the ongoing privatisation debate. While governments, on average, leave money on the table when privatising companies, the authors also report evidence to suggest that these companies are operated more efficiently in private, as opposed to public, hands.
- Subject
- privatisation; government assets; Australian government systems
- Identifier
- http://hdl.handle.net/1959.13/1317121
- Identifier
- uon:23338
- Identifier
- ISSN:1034-3040
- Language
- eng
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