Journal of Financial Economics Vol. 89 No. 3 2008
Testing limits to policy reversal: Evidence from Indian privatizations☆
Abstract
We examine the effect of regime change on privatization. In the 2004 Indian election, the pro-reform BJP was unexpectedly defeated by a less reformist coalition. Stock prices of government-controlled companies that had been slated for privatization by the BJP dropped 3.5% relative to private firms. Government-controlled companies that were under study for possible privatization fell 7.5% relative to private firms. This is consistent with investor belief of a “point of no return,” where advanced reforms are more difficult to reverse. Further analysis suggests that layoffs, combined with the privatization announcement, served as a credible commitment to privatize.
- DOI
- 10.1016/j.jfineco.2007.09.002
- Volume
- 89
- Issue
- 3
- Pages
- 513-526
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref