Why Do Governments Privatize Abroad?



Privatization through global equity market placement has largely contributed to financial market development and integration. Despite the relevance of the fact, the reasons underlying governments' choice to sell shares of privatized companies abroad are still poorly understood. This paper presents new evidence for a sample of 233 share issue privatizations in 20 OECD countries, showing that redistribution concerns and the objective of domestic financial market development make domestic privatization more likely. However, if budget constraints are binding, governments tend to sell abroad a larger quantity of shares, particularly when corporate governance at home is weak.