Article
Journal of International Business Studies (2009) 40, 840–858. doi:10.1057/jibs.2008.100
Credible privatization and market sentiment: Evidence from emerging bond markets
Narjess Boubakri1,2, Jean-Claude Cosset1 and Houcem Smaoui3
- 1HEC Montreal, Quebec, Canada
- 2American University of Sharjah, United Arab Emirates
- 3King Fahd University of Petroleum and Minerals, Saudi Arabia
Correspondence: J-C Cosset, HEC Montreal, 3000 Cote Sainte Catherine, Montreal, Quebec, Canada H3T 2A7. Tel: +1 514 340 6872; Fax: +1 514 340 6987
Received 15 February 2007; Revised 14 February 2008; Accepted 2 March 2008; Published online 22 January 2009.
Abstract
This paper investigates the link between privatization and emerging market sovereign bond spreads. We conjecture that the way privatization is implemented may help to build a favorable market sentiment by gradually building investor confidence, which should then lead to a lower required compensation for policy risk. Controlling for other determinants of sovereign bond spreads, we find that privatization proceeds do not affect spreads, while privatization progress and share issues reduce spreads.
Keywords:
privatization, emerging bond market spreads
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