The Choice of Private Versus Public Capital Markets : Evidence from Privatizations

Using a sample of 2477 privatizations from 108 countries that raised $1.2 trillion between 1977 and 2000, we analyze the choice between raising funds in public versus private capital markets. This choice is influenced by capital market, political, and firm-specific factors. Share issue privatizations (sales of shares through public equity markets) are more likely in less developed capital markets, probably as a way to help develop capital markets, and for larger and more profitable state-owned enterprises. In contrast, asset sales (sales to a small group of investors using private capital markets) are more likely to occur where governments respect property rights, and are thus not expected to expropriate the privatized assets