Can Governments signal commitment in privatization sales?

The literature on staggered privatization sales suggests that governments can effectively signal commitment to not expropriate the future rents of privatized firms. The privatization of telephone firms around the world provides an excellent opportunity to test this theory. Using a sample of repeated privatization sales I test whether governments can effectively signal commitment by selling ownership gradually and transferring managerial control immediately. The use of panel data with fixed-effects provides consistent estimates when commitment is not observed and time-invariant. Unobserved commitment is rendered time-invariant by using repeated sales within a government administration, typically within two years. The results cast doubt on the ability of governments to effectively signal commitment and increase the market value of firms in privatization sales. These results hold for several signals tested.