Share issue privatization and political objectives: do governments make a difference?

This paper empirically analyzes the political and economic objectives underlying privatization on the stock market. Particularly, I explain the factors of SIPs underpricing, and analyze if the change of political parties in government play a role on the issue. The paper has two main findings. Fist, larger initial returns occurred in the early stages of privatization. Second, the change of government from left-wing to right-wing did not lead to significantly higher levels of underpricing. My results show that governments are quite pragmatic with respect to underpricing: maximizing proceeds from SIPs shows to be more important than ideological differences between parties in government.