Whence the privatized firm dividend premium?

Whence the privatized firm dividend premium?

Abhinav GoyalUniversity of Liverpool,

Liverpool, UK∗

Shrikant JategaonkarSouthern Illinois University,

Edwardsville, USA†

William L. MegginsonUniversity of Oklahoma,

Norman, USA‡

Cal MuckleyUniversity College Dublin,

Dublin, Ireland§

This Version: Mar. 15th, 2014

Abstract

We find that the major determinants of the payout premium of firms after pri-vatization are improved firm operating performance and a prevalence of agency costswhich are mitigated by higher pay outs. We examine up to 82,612 firm-years (up to409 privatized and 6,193 non-privatized firms) across 26 countries. The privatized firmpayout premium increases substantively in civil law countries and is inversely relatedto the proportion of closely held shares. It also increases with firm earnings, efficiencyand growth opportunities. Our main findings do not materially differ in respect to theinternational variation over time of the dividend tax penalty and across the state ofeconomic development in the country of firm privatization but they are not evidentin industry sectors with high levels of regulation. We therefore provide an economicrationale for the higher pay outs of privatized firms.

Keywords: Agency costs, dividends, privatization, operating performance, dividendtax penalty.JEL Classification: G35, L33, L25

∗E-mail: [email protected]†E-mail: [email protected]‡E-mail: [email protected]§E-mail: [email protected] Corresponding author: Cal Muckley, School of Business, University

College Dublin, Blackrock, Dublin, Ireland. The authors would like to thank for suggestions GurmeetBhabra, Harjeet Bhabra, Angus Chu, Dominique Demougin, Chinmoy Ghosh, Iftekhar Hasan, Olan Henry,Narayanan Jayaraman, Steven Jones, Kathleen Kahle, Jason Laws, Brendan McCabe and Michael McKenzieparticipants at the Finance, Economics and Econometrics seminar in the University of Liverpool (Oct. 11,2013), Financial Management Association annual meeting 2013 in Chicago (Oct. 17, 2013), Indian FinanceConference annual meeting 2013 in the IIM-A, Ahmedabad (Dec. 18, 2013), Mid-West Finance Associationannual meeting 2014 in Orlando (Mar. 8, 2014). This paper is scheduled to be presented at Global FinanceConference annual meeting 2014 in Dubai (Mar. 31, 2014) and INFINITI Conference, 2014 in Prato (June9, 2014). The usual disclaimer applies.

1 Introduction

We undertake a comprehensive analysis of dividend pay outs by up to 409 privatized and

6,193 non-privatized firms from 26 countries and highlight an interesting and important

question: Why do newly privatized firms increase dividends? Previous studies examining

the change in firm characteristics around privatizations document a significant increase

in dividends by newly privatized firms (Megginson, Nash, and van Randenborgh, 1994,

Boubakri and Cosset, 1998, among others).1 The objective of this study is to better un-

derstand the economic motivations behind privatized firms’ tendency to pay a dividend

premium.2 In line with the Miller-Modigliani (1961) payout irrelevance proposition, we

account for operating performances and test whether variables associated with a privatized

firm’s incomplete contracting possibilities, financial life-cycles, information asymmetries or

taxes are of foremost importance in explicating its dividend pay outs.

The high dividend pay outs by privatized firms is evident even relative to non-privatized

firms. The difference in the amount of dividends paid by privatized and non-privatized

firms is, in fact, startling. In 2005, von Eije and Megginson (2008) find that, while the

average cash dividend payment by 4,070 non-privatized firms was euro 21 million, the

average cash dividend payment by 83 privatized firms was euro 308 million. However, the

question regarding the privatized firms’ motives behind paying such high dividends is still

unanswered in the literature. We attempt to fill this gap by asking (i) why privatized firms

pay a dividend premium and (ii) what factors allow them to do so? To find answers to

these questions, we empirically analyze the change in dividend pay outs for privatized firms

around the time of privatization and also compare them to a sample of non-privatized firms.

Changes in the firm’s objective function during privatization can induce uncertainty

in the investor’s mind about the firm’s future direction.3 While privatization is expected

1In our sample, the non-privatized firms are firms that have never been controlled by the government.Privatized firms, on the other hand, are government controlled entities that sell shares or assets to a non-government entity.

2Although we do not expect a share repurchase payout premium on part of privatized firms as thesefirms issue shares as an integral part of the privatization process, we test for it. We repeat the analysis foran aggregate sample of 394 repurchasing firms. In the full sample of firms, there is no evident repurchasepremium once well-known pay out determinants are accounted for. Only a very small number of firms fromMexico and Russia, occasionally, account for a significant amount of repurchases. However, overall, we findno evidence of a repurchase premium by privatized firms.

3While a state-owned enterprise (SOE) may pursue objectives conflicting with profit maximization, pri-vatization leads to a significant change in the firm’s ownership structure, which in turn may lead to a change

2

to bring efficiency, it also means higher capital market scrutiny, harsher product market

competition, and the possibility of increased agency conflicts between stakeholders. We

hypothesize that higher agency conflicts result into higher dividends as the shareholders of

firms that have high potential agency conflicts would demand higher pay outs in the form of

dividends; in the process minimizing the discretionary cash under the management’s con-

trol (Pinkowitz, Stulz and Williamson, 2006 and Harford, Mansi and Maxwell, 2008). We

empirically test various implications of agency theory to examine whether privatized firms

pay higher dividends to mitigate agency costs. First, the free cash flows theory (Jensen

1986) would imply that privatized firms have higher free cash flows and use dividends for

disbursement to avoid the over-investment problem. Similarly, Easterbrook (1984) sug-

gests that dividends can be used as a potential solution to agency conflicts as it subjects

the managers to market scrutiny while raising external funds. Second, we examine how

the level of firm’s ownership concentration can have an effect on the firm’s dividend policy

(Chay and Suh, 2009). While the conflict between the management and firm’s shareholders

implies that a low proportion of ownership by insiders results into higher agency conflicts,

the conflict between the controlling and minority shareholders suggests the opposite. Mi-

nority shareholders will demand higher dividends if they are concerned that the controlling

shareholders might extract rents through other mean such as salaries and perks (Chay and

Suh 2009). The substitution (outcome) hypothesis put forth by La Porta, Lopez-de-Silanes,

Shleifer, and Vishny (2000) predicts that these concerns will be exacerbated (alleviated) in

civil law (common law) countries as they offer lower (higher) protection to minority share-

holders. Therefore, third, we test whether the dividend policy of privatized firms differs

across the civil and common law countries.

Our findings support the predictions of agency theory. Specifically, as we find privatized

firm pay outs decline with an increase in the proportion of closely held shares (a proxy for the

fastidious monitoring of management by shareholders), we show evidence consistent with

the prevalence of agency costs influencing pay outs (Chay and Suh, 2009 and Aggarwal, Erel,

Ferreria and Matos, 2011). Our strongest finding, however, is that as pay outs by privatized

firms, relative to non-privatized firms, are highest in civil law countries our results provide

in the firm’s objective function (Jones, Megginson, Nash and Netter, 1999). For instance, after privatization,firms are more likely to focus on profit maximization (D’Souza, Megginson, and Nash, 2005).

3

economic support for the ‘substitution model’ of La Porta, Lopez-de-Silanes, Shleifer, and

Vishny (2000). In contrast, the findings of La Porta, Lopez-de-Silanes, Shleifer, and Vishny

(2000), in a large international sample of firms, suggests the importance of their ‘outcome

model’. Our results highlight the distinctiveness of privatized firms pay outs. Lastly, we

also find some support for the free cash flows hypothesis. We argue that the changes in

firm’s ownership structure and objective functions around privatization can lead to higher

agency conflicts and create uncertainty about the firm’s future direction. Managers of the

newly privatized firms may use dividends to alleviate the shareholder concerns and mitigate

the agency costs.4

Alternatively, the life-cycle theory of dividends suggests that there is a trade-off between

the costs and advantages of retention of internally generated capital and firms tend to

initiate dividends after reaching a certain maturity level.5 DeAngelo, DeAngelo, and Stulz

(2006) show that firms with high proportions of earned capital as a proportion of total

equity are more likely to pay dividends. We test whether the privatized firms are in a

phase of financial life cycle that makes them better candidates for disgorging the retained

earnings to shareholders. By comparing the retained earnings to total equity (RETE) for

the privatized and non-privatized firms, we show that the higher pay outs of privatized

firms are not accounted for by the life-cycle theory. In our sample, we find that while

non-privatized firms have a higher median RETE, privatized firms pay higher dividends.

In a similar vein, the maturity hypothesis suggests that as the firm moves from the growth

phase to a more mature phase of its financial life-cycle, the firm’s investment opportunity

set starts to contract and it experiences a reduction in growth and capital expenditures

(Grullon, Michaely, and Swaminathan, 2002). We test these predictions by examining the

change in total assets and growth opportunities of the privatized firms. Our findings do

4Under this scenario, managers are using dividends for signalling. However, it is not a traditional signalabout the changes in future earnings (Bhattacharya, 1979, Miller and Rock, 1985, and John and Williams,1985). Instead, managers are paying dividends to signal their willingness and attempts to mitigate theagency conflicts. Therefore, we conclude that our findings support the predictions of agency conflicts andnot the traditional signalling theory.

5It is noteworthy that there is an important theoretical linkage between the financial life-cycle phaseof a firm, agency costs and dividends. The opportunity to over-invest and fritter away free cash flows isheightened as the firm transits to a mature phase of its financial life-cycle and as management concurrentlyseeks to maximise assets under management (Jensen, 1986 and Grullon, Michaely and Swaminathan, 2002).Dividend pay out at this financial life-cycle phase transition can act as a mechanism to mitigate agencycosts.

4

not support the life-cycle theory or the maturity hypothesis in respect to explicating the

privatized firm payout premium. We not only find a significant increase in the total assets

after privatization but also a significant growth in the earnings, sales, and market-to-book

ratio.

Our findings show a strong positive link between the privatized firms’ dividend premium

and the growth in sales, earnings, and firm efficiency following privatization. There is a

paucity of studies examining the actual determinants of the payout policy of privatized

firms or explaining why exactly these firms increase dividends. This study contributes to

the literature by empirically examining exactly which factors influence the dividend policy

of privatized firms. To the best of our knowledge, we are the first to explicitly show that the

higher pay out of post-privatization firms is principally associated with improved operating

performance and firm efficiency combined with the ‘substitution model’ of the agency costs

hypothesis, and is off-set by the higher level of closely held shares in privatized firms relative

to non-privatized firms. We test the robustness of our findings by examining the sub-samples

based on (i) the extent of privatization; (ii) competitiveness of the industry; and (iii) the

level of economic development of the firm’s domestic country. We find qualitatively similar

findings across these sub-samples.

Our paper proceeds as follows: Section 2 contains a brief review of the literature.

Our sample selection process, variable definitions, and summary statistics are discussed in

Section 3. Empirical results are in Section 4, while Section 5 concludes.

2 Literature review

2.1 Payout policy

Since Miller and Modigliani’s (1961) irrelevance proposition of dividends, theories based

on information asymmetry, agency conflicts, and a firm’s financial life-cycle stage, among

others, have been put forth and empirically tested by researchers.6 It is important to note

that these theories are not mutually exclusive and may co-exist with different extents of

6See the survey article by Allen and Michaely (2003) for a detailed summary of both the theoretical andempirical literature on payout policy. In our estimation of the privatized firm dividend payout premium wedo not account for the catering theory of dividend payout determination, since catering incentives have beenshown to lose their significance when accounting for life-cycle and risk variables (DeAngelo, DeAngelo, andStulz, 2006, Denis and Osobov, 2008, von Eije and Megginson, 2008).

5

influence in different settings.

2.1.1 Agency costs theory

The agency costs theory suggests that the costs associated with prospective agency conflicts

can affect the payout policy of the firm. If shareholders can minimize the free cash flows that

management controls, for instance by a limited disciplinary action, it becomes more difficult

for management to pursue negative net present value investments (Jensen and Meckling,

1976, Easterbrook, 1984, and Jensen, 1986). The free cash flow hypothesis implies that firms

disburse cash to shareholders to mitigate the potential over-investment by management and

to increase share price, for example, to reduce the cost of raising capital in the market in

future. This relation between payout and investment policies is a clear infringement of an

assumption of the Miller and Modigliani’s (1961) irrelevance proposition of dividends.

The evidence on agency theory is mixed with respect to the importance of its influence on

pay outs. While Lang and Litzenberger (1989) and Grullon, Michaely, and Swaminathan

(2002) find evidence supporting the predictions of the Jensen and Meckling (1976) and

Jensen (1986) free cash flows theory, more recently, Chay and Suh (2009) do not find support

for the agency theory of pay out, when accounting for cash flow uncertainty. Another aspect

of agency costs theory is to examine the effect of shareholders’ rights on the firm’s payout

policy. La Porta, Lopez-de-Silanes, Shleifer, and Vishny (2000) compare the strength of

corporate governance mechanisms across 33 countries and test its effect on dividend policies

in these countries. They conclude that firms in common law countries are more likely to

pay dividends than those in civil law countries because the common law system provides a

better investor protection and stronger corporate governance. Taking these points together,

with respect to the agency theory of pay outs, it is clear that dividends in themselves can

be good news as they can serve to allay agency costs which might otherwise serve to fritter

away a firm’s free cash flows.

An alternative to altering firm pay outs and a possibly more effective mechanism for

limiting free cash flows is to increase the level of debt (Jensen, 1986). This is especially

the case when an increase in leverage can act as a substitute for an expensive decrease

in dividends to finance an improved investment opportunity set. Another mechanism for

the mitigation of management shareholder agency costs is the extent of closely held shares.

6

The greater the proportion of closely held shares, especially by large firms, can act as

a monitoring mechanism and can also substitute for firm pay outs (Chay and Suh, 2009

and Aggarwal, Erel, Ferreria and Matos, 2011). Finally, with respect to the free cash flow

hypotheses, it is expected to find a positive relation between a privatized firm’s cash holding

and pay out (Pinkowitz, Stulz and Williamson, 2006 and Harford, Mansi and Maxwell,

2008). A higher cash holding is consistent with a greater scope to fritter away free cash

flows which is offset by higher pay outs.

2.1.2 Life-cycle theory

The theory that has received strong empirical support in recent times is the life-cycle theory

of dividends. DeAngelo, DeAngelo, and Stulz (2006) argue that there is a trade-off between

the costs and advantages of retention of internally generated capital, which evolves with

respect to the financial life cycle of the firm. Using the earned/contributed capital mix,

they measure the extent to which the firm is self-financing or reliant on external capital.

DeAngelo, DeAngelo, and Stulz (2006) suggest that higher levels of retained earnings to

total equity indicate that the firm has become a better candidate to initiate dividends and

show that a large fraction of such firms actually pay dividends.7 Using a sample of world-

wide firm-level data, Denis and Osobov (2008), Chay and Suh (2009) and Brockman and

Unlu (2011) report findings that further corroborate the life-cycle theory. They find that

the earned/contributed capital mix is an important determinant of payout policy in many

countries. Furthermore, Chay and Suh (2009) test the effect of cash flows uncertainty,

proxied by stock return volatility, on dividends by using worldwide firm-level data.8 Con-

sistent with the predictions, they find a strong negative impact of cash flow uncertainty,

independent of retained earnings to total equity, on the amount of dividends as well as the

probability of paying dividends across countries. Finally, Brockman and Unlu (2011) show

a firm’s disclosure environment plays a significant role in dividend pay outs through its

effect on agency costs. They confirm an agency-cost inclusive life-cycle theory of dividends.

7However, in a recent paper, Banyi and Kahle (2013), provide a criticism of the earned to contributedcapital mix as a life-cycle proxy variable for firms listed in the United States.

8Lintner’s (1956) survey study indicates that managers view stability of earnings as an important factorin dividend decisions. More recently, Brav, Graham, Harvey, and Michaely (2005) also find that two-thirdsof the CFOs of dividend-paying firms consider stability of future cash flows as a significant determinant ofdividend policy.

7

2.1.3 Traditional signalling theory

The traditional signalling theory, which is based on information asymmetry, implies that

managers use payout policy to convey information regarding the future earnings changes of

the company. The associated signalling models by Bhattacharya (1979), Miller and Rock

(1985) and John and Williams (1985) therefore imply that higher dividend pay outs can

indicate confidence on the part of firm management in the firm’s future earnings improve-

ments to the market.9 In line with findings in Von Eije and Megginson (2008), we show that

firm transparency improves as firms increase the frequency of earnings reporting immedi-

ately following privatization. Hence, newly privatized firms are unlikely to use dividends to

signal future changes in earnings as there is a marked improvement in the available informa-

tion regarding the firms’ expected earnings following privatization. Indeed, the signalling

theory, which is based on information asymmetry, has faced some challenges when put to

empirical tests.

In summary, we do not consider this signalling theory as a likely explanation for the

dividend payout premium associated with privatized firms for five main reasons informed

by previous findings in the literature. First, the relation between dividend changes and

subsequent earnings changes is generally the opposite to what the theory predicts (Watts,

1973, Healy and Palepu, 1988 and Grullon, Michaely, Benartzi and Thaler, 2005). Second,

cross-sectional studies indicate that large profitable firms with the least evident informa-

tion asymmetries pay the vast majority of dividends and are more likely to pay dividends

(DeAngelo, DeAngelo and Skinner, 2004 and von Eije and Megginson, 2008). Third, in

their survey paper, Brav et al. (2005) report that majority of CFOs do not use dividends

as a signaling mechanism. Forth, there is a significant price drift in subsequent years

which is difficult to reconcile with the assumption of rationality in the information asym-

metry based signalling models (Michaely, Thaler and Womack, 1995 and Grullon, Michaely

and Swaminathan, 2002). Finally, we elect not to use the information asymmetry based

signalling model due to a long-standing theoretical rationale. The cited information asym-

metry based signalling models (except John and Williams, 1985 which allows a distinction

9Bhattacharya’s (1979) model takes the cost of share issuance as the cost of the signal. Miller and Rock’s(1985) model assumes that the signalling cost is the positive net present value of investment forgone andJohn and Williams (1985) present a model in which taxes are the dissipative cost.

8

based on tax rates) assume that dividends and repurchases are perfect substitutes. There

is, however, considerable empirical evidence of important distinctions in the information

content of different payout channels in respect to firm risks (von Eije, Goyal and Muckley,

2014).

Instead dividends may act as an inadvertent reflection of the firm’s changing circum-

stances (Miller and Modigliani, 1961 and Miller and Rock, 1985). Dividends, as a by-

product of their residual nature after investment, may reflect the changes in contemporane-

ous earnings of the firm and, independently of the classic signalling models, as earnings can

be positively auto-correlated over time, and this association can link dividends to future

earnings.

2.2 Privatization and pay outs

During the 1980s and 1990s, extremely large companies in the European Union (EU) were

privatized. As a result, the literature on privatization has been rapidly growing over the

last three decades.10 A series of papers have examined the effect of privatization on var-

ious firm characteristics and performance measures. For instance, Megginson, Nash, and

van Randenborgh (1994) compare the pre- and post-privatization financial and operating

performance of 61 companies from 18 countries during the period 1961 to 1990, and report

a strong performance improvement and increase in capital spending in the privatized firms.

They also find that, after being privatized, firms significantly lower their debt and increase

their dividends. Using a sample of 21 developing countries, Boubakri and Cosset (1998)

also examine the change in financial and operating performance of 79 privatized firms dur-

ing the period 1980 to 1992 and they find results similar to those reported by Megginson,

Nash, and van Randenborgh (1994). D’Souza and Megginson (1999) examine a sample of

85 privatizations in 28 industrialized countries during 1990 through 1996 and report similar

results of post privatization performance improvements. They also find that firms in the

noncompetitive industries exhibit significantly greater increases in dividend pay outs, firm

efficiency, profitability, and output and larger reductions in leverage. Boubakri, Cosset and

Guedhami (2005) and D’Souza, Megginson and Nash (2005) corroborate the earlier findings

10See the survey article by Megginson and Netter (2001) for a detailed review of the literature on priva-tization.

9

but also their findings imply that the implications of privatization in developing markets

are influenced by macro economic reforms, financial and trade liberalization, and corporate

governance and thus that ‘privatization in developing countries indeed obeys to particular

constraints and has a dynamic of its own’.

The fact that privatized firms pay significantly higher dividends after privatization and

relative to their non-privatized counterparts is well established in the literature. However,

it is still unclear why these firms pay such high dividends and which factors influence this

difference in the payout policies. We test whether the difference between dividend pay outs

stems principally from differences in signalling motives, agency conflicts or the phase of the

financial life-cycle between the two groups.

3 Data and variable descriptions

Our dataset includes a total of 6,602 listed firms (82,612 firm-years) out of which 409 are

privatized firms (5,406 firm-years). The sample consists of firms listed on exchanges (and

headquartered) in 26 countries globally. The data is primarily obtained from Worldscope.

Our sample commences in 1990 and extends to 2011.11 We apply sample restrictions

consistent with prior studies. Consistent with recent literature on international corporate

pay out determination (e.g. von Eije and Megginson, 2008, Denis and Ososbov, 2008,

Chay and Suh, 2009 and Brockman and Unlu, 2009), we exclude foreign firms, American

Depository Receipts (ADRs) and firms with negative dividends and sales. As a final filter,

we exclude countries with less than three privatized firms.

Worldscope defines privatization as a government or government controlled entity that

sells shares or assets to a non-government entity. This definition of privatization includes

both direct and indirect sales of up to a 100% stake to an identifiable buyer and floatation

of stock on a stock exchange. Non-privatized firms are firms that have never been controlled

by the government. We source a unique identifier for the privatized firms and their year of

privatization in the merger and acquisitions section of Worldscope. Due to data availability

constraints, we have the year of privatization for 302 firms out of the 409 firms that we

examine. Specifically, 245 of these firms were privatized during our sample period, 1990

11The coverage of firm-specific data outside the United States prior to 1990 is limited (Denis and Osobov,2008).

10

to 2011. When we study the pay out determination 3-years pre- and post-privatization,

our dataset is constrained to a sub-sample of 92 privatized firms for which we have data

available for all the necessary variables.

In Appendix 1, we provide a detailed description of the variables we use in our study.

PVT is a dummy variable that indicates a privatized company. Our variable for cash

dividends (DIV) is the total real amount distributed as cash dividends by the firm in 1990

US dollars. Consistent with prior literature on corporate pay out, we adopt several firm-

specific characteristics to estimate the determination of firm pay outs. In line with Fama and

French (2001) and Dennis and Osobov (2008) we use the market capitalization (MV) and

annual percentile ranking based on market capitalization (SIZE) as a proxy to measure firm

size. Next, in order to study firm-level profitability we use earnings before interest and after

tax to total assets; ER (von Eije and Megginson, 2008) and net income; NI (Brockman and

Unlu, 2009). We use retained earnings to total equity; RETE (DeAngelo, DeAngelo, and

Stulz, 2006) and firm-level cash holding; CASH (Aggarwal, Erel, Ferreira, and Matos, 2011)

as a proxy for firm financial life cycle phase and firm liquidity. Following Chay and Suh

(2009) we use the fraction of common stock owned by insiders; CLOSE as a proxy variable

for agency conflicts and change in ownership concentration pre- and post-privatization. To

control for the income risk of the firm, we include the standard deviation of last three years’

net income scaled by each year-specific total assets; NI Risk (von Eije and Megginson 2008).

As a proxy for the firm’s growth opportunities, we construct an annualized real change in

total assets (G TA) and market-to-book value (MTBV) of the firm (Fama and French, 2001

and Denis and Osobov, 2008) and an annualized real change in sales; G Sales (La Porta,

Lopez-de-Silanes, Shleifer, and Vishny, 2000). Following Brockman and Unlu (2009), we

control for the firm-level leverage (LR), which can allay prospective agency costs of free

cash flows due to associated monitoring by the lending institution (Jensen, 1986). We use

the frequency of financial reporting (ERF) as a proxy for firm transparency (von Eije and

Megginson, 2008). Following Megginson, Nash, and van Randenborgh (1994) and Boubakri

and Cosset (1998), we incorporate sales to employees (Sales Emp) and total employment

(Emp) as a parameter to test the firm-level efficiency.

Finally to account for the investor rights, we follow La Porta, Lopez-de-Silanes, Shleifer,

and Vishny (1997) and include a dummy variable (COM=1) for common law countries in

11

our sample. We also include a time trend variable (YEAR) to account for a deterministic

time trend in payout amounts. The country-specific consumer price indices are used to

deflate the nominal firm-specific accounting and financial data into real 1990 US$. We use

US$ as a common currency numeraire by converting the local currency unit values into

US$ using the year-end conversion rate. To adjust for the extreme outliers, we winsorize

variables defined as ratios, namely earnings ratio (ER), retained earnings to total equity

(RETE), cash holding (CASH), ownership concentration (CLOSE), income risk (NI Risk),

growth in total assets (G TA), market-to-book value (MTBV), growth in sales (G Sales),

leverage ratio (LR) and sales- to-employee ratio (Sales Emp) at the top and lower 1% of

their respective distributions (Aggarwal, Erel, Ferreira, and Matos, 2011).

The sample distribution of privatized firms across 26 countries is reported in Panel A of

Appendix 2. The dataset contains privatizations from viz. India and Mexico (3 privatized

firms each), Malaysia and Norway (4 privatized firms each), Chile and China (5 privatized

firms), Argentina, Australia, Greece, Netherlands and New Zealand (6 privatized firms

each), Austria and Portugal (7 privatized firms each), Finland and Turkey (9 privatized

firms each), Peru (10 privatized firms), Spain (14 privatized firms), Sweden (16 privatized

firms), Italy (19 privatized firms), Poland (20 privatized firms), Brazil and Germany (28

privatized firms each), Russia (31 privatized firms), France (41 privatized firms), Canada

(57 privatized firms), and the U.K. (59 privatized firms). The average dividends paid in

each country are also reported.

Following Megginson, Nash, and van Randenborgh (1994) and D’Souza and Meggin-

son (1999), Panel B of Appendix 2 separates the privatized firms into control and revenue

privatization.12 While the average dividends paid by firms privatized to concede control

is $107.38 million, the average dividends for the firms which were privatized for revenue

is $298.12 million. Panel C separates the privatized firms into competitive versus non-

competitive industry groups (Megginson, Nash, and van Randenborgh, 1994, Boubakri

and Cosset, 1998, D’Souza and Megginson, 1999).13 While the average dividends paid by

12A control privatization is where government reduces its stockholding to below 50% and a revenueprivatization is where governments retains majority ownership, i.e., more than 50% ownership.

13A competitive industry is one where the firm is subject to international product market competition. Anon-competitive industry is one where the firm is not subject to international product market competition,i.e., financial institutions, banks and utilities.

12

firms in the competitive industries is $128.02 million, the average for the firms in the non-

competitive industries is $213.32 million. Panel D of Appendix 2 shows that out of the total

409 privatized firms in the sample, 124 firms are from the emerging markets (developing

countries) and the other 285 firms are from developed countries. This disaggregation of our

set of privatized firms across developing and developed markets is motivated by the distinc-

tive implications of privatization in developing markets (Boubakri, Cosset and Guedhami,

2004, D’Souza, Megginson and Nash, 1999). In our sample of privatized firms, while the

average dividend for firms in the developed countries is $155.42 million, the average for the

firms in the developing countries is about $113.88 million. Panel E reports the number of

privatized firms and the average dividends by industry in our sample.

4 Empirical findings

4.1 Pre- and post-privatization

We initially focus on just privatized firms and report the variables used in the study pre-

and post-privatization. Figure 1 shows the change in certain firm characteristics related to

growth opportunities (MTBV, G TA and G Sales), profitability (ER) and dividends (DIV

and DIV EBIAT) for -3 to +3 years relative to the privatization year.14 Table 1 reports

the mean and median for all the firm characteristics during the 3-years pre- and post-

privatization, and whether differences are significant. As shown in figure 1, along with an

increase in dividends, we find an increase in profitability (ER) and growth opportunities

(G TA and G Sales) post privatization and we find no decline in the market to book value

(MTBV). The proportion for dividend payout (DIV) reported in table 1, shows that 77%

of our sample firms increase dividends after privatization.15 Along with increases in payout

(DIV, DIV EBIAT, and DIV NI), a large proportion of firms exhibit a significant increase

in the profitability (ER),16 asset growth (G TA), sales growth (G Sales), and firm efficiency

14We use up to 245 privatized firms in our sample to construct figure 1. The exact number of firms foreach year varies depending upon the data availability.

15However, we follow previous studies such as Boubakri and Cosset (1998), D’Souza and Megginson(1999), Boubakri, Cosset, and Guedhami (2005) and D’Souza, Megginson, and Nash (2005) and applystricter restrictions to calculate the numbers reported in table 1. Specifically, we require the firms to haveat least two years of consecutive data during both pre- and post-privatization periods. The findings in table1 are therefore for a constrained data set of between 92 and 121 privatized firms which satisfy the datarequirements. These firms were privatized between 1992 and 2009.

16EBIAT, NI, and Sales also increase post privatization though the results are not reported here.

13

(Sales Emp).

[Please insert figure 1 about here]

As expected, we find a significant decrease in ownership concentration (CLOSE) after

privatization. While the average ownership concentration is 74.67% before privatization,

it decreases to 52.66% during the 3-years after the privatization. We find an increase in

the firm risk (NI Risk) after privatization. On one hand, this post privatization increase

in the standard deviation of net income could reflect the high uncertainty during firm’s

transition from SOE to a privatized firm. On the other hand, it could be a consequence of

the rapid growth in earnings exhibited by the newly privatized firms. As reported in table

1, unlike in previous studies (Meginnson, Nash, and van Randenborgh, 1994, Boubakri and

Cosset, 1998, D’Souza and Megginson, 1999) we find no significant change in leverage (LR)

following privatization, which is indicative of no new monitoring by lending institutions

after firm privatization. We do find a significant increase in financial reporting frequency

(ERF) from before privatization (1.90) to after privatization (2.68), which is consistent with

the newly privatized firm wanting to reduce the information asymmetry and uncertainty

in the investor’s mind regarding the firm’s future direction.17 Overall, the comparison

between variables during pre- and post-privatization periods suggests that privatization is

associated with increases the amount of cash dividends (DIV, DIV EBIAT, DIV NI), firm

efficiency (Sales Emp), firm size (MV, SIZE), firm transparency (ERF), growth (G TA,

MTBV, G Sales), income risk (NI Risk), profitability (ER) and retained earnings (RETE).

Privatization results in a decrease in firm ownership concentration (CLOSE).

[Please insert table 1 about here]

We extend our analysis by partitioning the sample of 121 privatized firms into subsam-

ples based on three criteria: extent of privatization, the level of regulation in the industry,

and the level of development in the country to compare the performance changes for these

firms during the 3 years pre- and post-privatization. Findings for the subsamples are re-

ported in table 2. Panel A reports the comparison of subsamples based on the extent of

17Alternatively, the increase in ERF could be a result of higher scrutiny by the capital markets andconsequently investors’ expectations for all publicly traded companies to report earnings frequently.

14

privatization. Control privatization refers to cases where the government reduces its stock-

holding to below 50% and the Revenue privatization refers to cases where the government

retains ownership of more than 50%. We have 38 control privatization and 83 revenue pri-

vatization in our sample. We find that while the dividend (DIV) increases for both groups,

the increase in pay out is more pronounced for revenue privatization and this is consistent

with a possible attempt to allay agency costs evident after revenue privatization. We find

a significant increase in firm size (MV, SIZE) and profitability (ER) for both subsamples

following privatization. As expected, we find the ownership concentration (CLOSE) to

be lower after control privatization. We find that the firm risk (NI Risk) increases only

for control privatization, but the increase in growth and frequency of financial reporting

(ERF) following privatization is significant for both groups. We find no significant change

in the leverage ratio (LR) of firms after privatization. The increase in median firm effi-

ciency (Sales Emp) is significant for both groups, but the increase in mean efficiency is

more prominent in the revenue group.

Panel B reports results for subsamples based on the industry’s competitiveness. The

companies are separated into firms that are subject to international product market com-

petition (90 sample firms) versus firms in non-competitive industries such as financial insti-

tutions and utilities (31 sample firms). While the dividend pay outs (DIV) increase in both

groups, consistent with D’Souza and Megginson (1999), the changes are more prominent

for the non-competitive industry group. We find an increase in firm size (MV, SIZE), prof-

itability (ER), and proportion of retained earnings in total equity (RETE), and ownership

dilution (CLOSE) for both subsamples following privatization. We also find a significant

increase in growth opportunities (G TA, MTBV, G Sales), financial reporting frequency

(ERF), and firm efficiency (Sales Emp) for both groups. In the non-competitive indus-

try sector we find an increase in firm leverage ratios (LR) after privatization. Finally, a

comparison between privatized firms in emerging versus developed countries reveals some

interesting findings. While the pay out (DIV) increases in both groups, the proportion of

firms that increase dividends is larger in the developed countries (84%) as compared to

the emerging countries (64%). The increase in scaled payout (DIV EBIAT and DIV NI) is

only significant in the developed countries. We find an increase in the earnings (ER), net

income risk (NI Risk), and firm efficiency (Sales Emp) in both groups. However, the re-

15

tained earnings (RETE), ownership concentration (CLOSE), and market to book (MTBV)

change only for the firms in the developed countries. Only in emerging markets is there a

significant increase in firm leverage ratios (LR) after privatization. Overall, we find that

the post-privatization increase in dividends (DIV) is accompanied by an improvement in

the firm’s earnings (ER), operating efficiency (Sales Emp), and sales (G Sales) and a de-

crease in ownership concentration regardless of how the sample is arranged into categories

of privatized firms.


4.2 Comparison between privatized and non-privatized firms

Table 3 reports the annual average and median cash dividends (DIV) paid by privatized

versus non-privatized firms in the sample during 1990 - 2011. The proportion of dividend

payers in both the groups is also reported for each year. Among the privatized firms, the

proportion of dividend payers is as low as 60% in 2004 and as high as 85% in 1990. The

corresponding numbers for the non-privatized firms are 57% in 2004 and 87% in 1990.

Consistent with Fama and French (2001), there is a decline in the proportion of dividend

payers over time. The decline in the proportion of dividend payers over time has been

slightly greater for the non-privatized firms. Over our sample period, 72% of the privatized

firms have been dividend payers. As compared to the non-privatized firms, overall, a

greater proportion of privatized firms pay dividends. The mean cash dividends paid by

privatized firms are significantly higher than those by non-privatized firms in each year of

our sample. There is an evident upward trend in the dividends paid by privatized firms

from 1990 through 2011.18 The average dividends paid by non-privatized firms have also

increased over time, but at a much slower pace. While the average annual dividend by

non-privatized firms is $73.34 million in year 2011, the average amount distributed by a

privatized firm in the same year is $305.47 million. Similarly, over the whole sample period,

the mean dividend for privatized firms is $143.59 million as compared to $35.50 million for

non-privatized firms.19 Table 3 also reports the annual medians. Each year, the median

18Note that these are real dividends in 1990 US Dollars.19Additionally, to show the substantial increase in dividends for privatized firms over time we can com-

pare the dividends for two groups in 1990 and in 2011. In 1990, privatized firm dividends are 1.83 times

16

dividends paid by privatized firms are significantly greater than those paid by non-privatized

firms. The comparison between the two groups clearly indicates that the privatized firms

not only pay significantly higher dividends than the non-privatized firms, but also a larger

proportion of privatized firms tend to pay dividends.


Table 4 reports summary statistics for the dependent and control variables used in the

study for the privatized and non- privatized firms. It is not surprising that the mean and

median for the unscaled dividend variable (DIV) show that the privatized firms pay much

larger dividends than non-privatized firms. While the median (average) dividend pay out

by privatized firms in our sample is $5.82 ($143.59) million, the median (average) pay out

by firms that have never been state owned is only $1.31 ($35.50) million.20 The median

dividend paid by privatized firms is almost 4.5 times ($5.82 / $1.31) of the median dividend

by the non-privatized firms. Some of the difference between dividend pay outs by these

two groups can be explained by the differences in their sizes. Comparing the market value

of equity (MV) and annual percentile size ranking (SIZE) for the two groups, it is evident

that privatized firms tend to be significantly larger in size. Therefore, we also analyze the

dividend pay outs adjusted for profitability (DIV EBIAT, DIV NI). Again we find that the

median DIV EBIAT and DIV NI are significantly higher for the privatized firms, which

suggests that the privatized firms pay out a significantly higher proportion of their earnings

as cash dividends.21 To study what influences this difference in pay outs across the two

groups, we next compare various firm characteristics and the factors that are known to

affect dividend policy.

(39.22/21.43) higher than for non-privatized firms. The same ratio in 2011 is 4.17 times (305.47/73.34).There is a similar increase in the medians of these ratios of privatized to non-privatized firms’ dividend payouts (from 2.46 times in 1990 to 7.4 times in 2011).

20von Eije and Megginson (2008) also compare the unscaled dividends in their paper (page 357) wherethey examine the impact of privatization on dividend payments and they show substantively similar resultsfor firms in the European Union.

21We acknowledge that the means for the scaled dividend variables are similar across the two groups.However, given the differences in the samples sizes and some of the outliers, we think that comparing themedians is a better approach.

17

First, we examine the profitability across the two groups and find that the mean and

median of the earnings ratio (ER) for the privatized firms are significantly higher.22 This is

an interesting finding as it suggests that dividends paid by privatized firms are high not only

because they pay out a higher proportion of earnings (median DIV NI and DIV EBIAT),

but also because the firms are significantly more profitable. In addition, we compare the

level of firm efficiency across the privatized and non-privatized firms. Following Megginson,

Nash, and van Randenborgh (1994) and Boubakri and Cosset (1998), we incorporate sales-

to-employees (Sales Emp) and total employment (Emp) as a parameter to test the firm-

level efficiency. We find the Sales Emp ratio to be higher (albeit not significantly higher)

for privatized firms. This is our first, albeit tentative, evidence of an association between

the dividends and firm profitability and efficiency of privatized firms.

Next, we use the retained earnings to total equity (RETE) ratio to proxy for liquidity

and to test the effect of the life-cycle theory of dividends. The life-cycle theory of divi-

dends (DeAngelo, DeAngelo, and Stulz, 2006) predicts that firms with higher proportions

of earned equity in their total equity should pay higher dividends. Using a sample of firms

from six developed countries, Denis and Osobov (2008) show that dividend payers exhibit a

higher retained earnings to total equity (RETE) ratio as compared to non-dividend payers.

We compare the retained earnings ratio of privatized versus non- privatized firms from 26

countries and find that while the mean retained earnings ratio is insignificantly higher for

the privatized firms, the median is actually significantly higher for non-privatized firms.

Therefore, the higher dividend pay out by privatized firms does not support the life-cycle

theory predictions. These univariate findings for the retained earnings ratio cannot explain

why the privatized firms tend to pay higher dividends. Further, we use growth in total

assets (G TA), market-to-book ratio (MTBV), and growth in sales (G Sales) to estimate

firm growth opportunities. We find no significant difference in G TA across privatized and

non-privatized firms. However, both the average and median MTBV and G Sales are sig-

nificantly higher for the privatized firms. The life-cycle theory and the maturity hypothesis

predict that firms with lower growth opportunities are more likely to pay dividends. Con-

trary to these predictions, we find that the privatized firms not only pay higher dividends,

22We also find that Earnings before interest and after tax (EBIAT), net income (NI) and Sales are alsosignificantly higher for privatized firms (not reported here).

18

but also have higher growth opportunities.

Following the agency costs theory of dividend determination, if new leverage is con-

sidered to increase the external monitoring of the firm, it reduces the need to disgorge

cash flows to shareholders as dividends (Jensen, 1986). As a result, we can expect, that

the leverage channel can be used either as a substitute for or to work in conjunction with

higher dividends. We find that privatized firms tend to have higher leverage. The higher

leverage ratio for privatized firms could be because government owned firms usually exhibit

higher debt levels. The non-privatized firms in our sample have never been controlled by

government and hence are likely to exhibit lower debt ratios and also tend to pay higher

dividends. It is interesting to note, however, that we do not find a reduction in leverage of

firms in the three year period after privatization.

The variable CLOSE estimates the ownership concentration of a firm. We find that the

ownership in privatized firms is more concentrated as compared to the non-privatized firms.

Specifically, we find the average ownership concentration for privatized and non-privatized

firms to be 62.24 and 46.31, respectively. This is not unexpected as the privatized firms

have been controlled by government in the past and the ownership gets dispersed overtime

after the firm has been privatized. On the contrary, the non-privatized firms in our sample

have never been controlled by the government and hence exhibit lower ownership concen-

tration. Chay and Suh (2009) predict a negative relation between ownership concentration

and dividends. Similarly, Megginson, Nash, and van Randenborgh (1994) suggest that if

the firm’s ownership is dispersed among small investors, none of whom have incentives to

monitor; shareholders are likely to demand higher dividends to reduce agency costs. By that

logic, the group with lower ownership concentration (non-privatized firms in our sample)

would be expected to pay higher dividends, if agency costs across groups are comparable.

However, one can argue that the higher concentration of ownership by insiders is a sign of

management entrenchment and higher agency problems. The privatized firms are, hence,

more likely to pay higher dividends. The difference in ownership concentration across the

two groups can explain why privatized firms pay higher dividends.

Finally, we examine the income risk (NI Risk) and the frequency of financial reporting

(ERF) of our sample firms. We find no significant difference in the medians for these two

19

variables across the two groups. While the average reporting frequency is slightly higher for

privatized firms (2.68) as compared to the non-privatized firms (2.52), the average income

risk is higher for non-privatized firms. Given these findings, it is unlikely that either of

these firm characteristics can explain the difference in the dividends. Therefore, the overall

univariate comparison between the privatized and non-privatized firms indicates that the

higher dividend pay outs by privatized firms might be a function of their significantly

better profitability (ER), efficiency (Sales Emp), and investment opportunities (G Sales),

while they can be simultaneously explained by way of a mechanism, together with closely

held shares (CLOSE) and firm leverage (LR), to offset higher prospective agency costs.


4.3 Multivariate analysis of the impact of privatization

We initially specify random effect models, for cash dividends paid, DIV (the natural log of

dividends), using the data for only privatized firms during the 3 years before and 3 years

after the privatization.23 The findings, reported in table 5, further give us an insight into

exactly which factors influence the dividend policy of firms post privatization. We report

the coefficient for each factor and also the difference, ‘Difference’, in coefficients for the pre-

and post-privatization periods.24

The results reported in table 5 corroborate our findings that the post-privatization

firm earnings (ER) and growth in sales (G Sales), growth in total assets (G TA), leverage

(LR) and the extent of information asymmetry (ERF) are major determining factors of the

dividends by newly privatized firms. The retained earnings to total equity (RETE) is not

significantly more positive in the post-privatization period and neither is the size (SIZE)

of the firm once the dividend tax penalty is accounted for. These latter findings constitute

evidence of an absence of influence of the financial life-cycle maturation of the privatized

23Due to data restrictions, we use 92 privatized firms for this analysis. In table 1, which contains univariateanalysis, the number of firms varies from 92 to 121. In the multivariate (regression) analysis, however, thefirm count is limited to 92.

24The ‘Difference’ column corresponds to the difference between the 3-year post privatization regressioncoefficients and the coefficients in the 3-year pre privatization period, estimated using interaction variables.The dummy variable in the interactions equals to 1 for the 3-year post privatization period and zero forthe 3-year pre privatization period. All independent variables are multiplied with this dummy and thecorresponding coefficient is indicated as ‘Difference’.

20

firm on its dividends.

The negative influence of a one percent increase in sales growth (G Sales), on divi-

dend pay outs reverses after privatization, from a -0.012% decrease in dividend pay outs

before privatization to a 0.028% greater increase in dividend pay outs after privatization.

Furthermore, this emergent positive association of sales growth is robust to the dividend

tax penalty as illustrated in panel B. As earnings from sales growth increase, firm pay

out increases too. In the same vein, the earnings ratio (ER) exhibits a positive influence

on the dividend pay out after privatization. After privatization, a one percent increase in

the earnings ratio (ER) is associated with a 0.05% increase in dividend pay out, and this

effect is also robust to the dividend tax penalty. Prior to privatization, there is a positive

association between growth in total assets (G TA) and pay out. In the post-privatization

period, however, there is a marked reversal of this influence. For a one percent growth in

total assets (G TA) there is a reduction of 0.04% of dividend pay outs, and this effect is

also robust to the dividend tax penalty. Our dividend tax penalty (DTP) is constructed

following Poterba and Summers, 1984 and Jacob and Jacob, 2013.25 As privatized firms

invest in assets, they pay out less. Turning to information asymmetry, a once per annum

increase in the earnings reporting frequency (ERF) is associated with a 0.26% reduction

in the privatized firm pay out. Hence, a reduction in information asymmetry can substi-

tute for privatized firm pay outs. It is also worthwhile noting that when the dividend tax

penalty is accounted for, leverage (LR) is positively associated with firm pay out. This is

consistent with leverage (LR) which can be used together with high dividends to discipline

management to pursue exclusively positive net present value investments. The dividend tax

penalty is shown to be internationally associated with no statistically significant marginal

influence on dividend pay outs for privatized firms in the post privatization period.

It is finally worthwhile noting that privatized firms in civil law countries pay out more,

even accounting for well-known determinants of pay out, and this effect strengthens post

privatization, albeit not significantly (mere statistical power implication).26 This finding

25The same results hold using other proxies for the dividend tax viz. a dividend tax preference (La Porta,Lopez-De-Silanes, Shleifer, and Vishny, 2000) and weighted average dividend tax preference (Becker, Jacoband Jacob, 2013). The results are available from the authors on request.

26This corroborates our finding in model III and model IV of tables 6 and 7, that the privatizationpayout premium is relatively small in common law countries (COM * PVT) despite the superior minorityshareholder rights in these countries.

21

supports the so-called ‘substitution’ free cash flow hypothesis as it suggests that an improve-

ment in minority shareholder rights, in common law (COM) relative to civil law countries,

implies a reduction in the dividend pay out as these minority shareholder rights substi-

tute for dividend pay outs (La Porta, Lopez-de-Silanes, Shleifer, and Vishny, 2000). Taking

these findings in table 5 together, we have evidence of the importance of improved operating

performance in explicating the privatized firm pay out premium and tentative evidence in

respect to information asymmetries and associated agency costs but no evidence in support

of the life cycle theory.


To further examine the impact of privatization on the dividend policy, we simultaneously

study the determination of dividends in both privatized and non-privatized firms. We use

random effect panel regression models to regress the natural log of dividend pay out (von

Eije and Megginson, 2008) on a wide set of determinants of dividend policy established in

the literature.27 The model includes all the determinants and the interactions used in the

model specifications of table 5. We include both the privatized and non-privatized firms for

this analysis, with a dummy (PVT) variable to identify privatized firms. This also enables

us to empirically test, using a difference-in-differences parametric regression methodology

(Ashenfelter and Card, 1985), whether interactions between the privatization dummy and

other variables significantly impact the dividend policy of our sample firms. The findings

are reported in table 6. In Model I, we test the impact of privatization on the cash dividend

pay out. Consistent with the findings reported in earlier tables, we find a significant positive

relation between privatization and dividend pay outs. This confirms that privatization has

a first order effect on the dividend policy.

In Model II, reported in table 6, we add the variables that proxy for different factors

that have been shown in the literature to have an impact on a firm’s dividend policy. We

find a positive relation between dividends and firm size (SIZE) and cash holdings (CASH),

which is consistent with the notion that larger firms with higher cash holdings pay more

27We also use scaled, to total assets and sales, adjustments of dividend pay out and we show similarfindings. The determination of scaled dividend pay outs is also principally associated with changes inprivatized firm earnings and firm efficiency and with a view to allaying prospective agency costs post-privatization. The results are available from the authors on request.

22

dividends. The life-cycle theory of dividends suggests that firms with higher proportion of

retained earnings in their total equity are more likely to pay dividends. However, for our

sample, we find a negative (albeit small) relation between retained earnings to total equity

(RETE) and dividends. This suggests that the firms in our sample do not pay dividends

because they have reached a certain stage in their life-cycle in which they are more likely to

distribute the cash flows to the shareholders. While we find a significant negative relation

between ownership concentration (CLOSE) and cash dividends paid by our sample firms,

we find a positive relation between the income risk and dividends. The coefficient for

market to book (MTBV) suggests a negative relation between growth opportunities and

dividends. Following von Eije and Megginson (2008), we use the frequency of financial

reporting (ERF) as a proxy for firm transparency. Increased frequency of financial reporting

should increase transparency and hence reduce the information asymmetry for the firm,

and thereby increase investors‘ capacity to monitor the firm. Wood (2001) suggests that

improvement in reporting and corporate governance would make investors less focused on

dividends. Consistent with these predictions, we find a significant negative relation between

dividends and the frequency of financial reporting (ERF). We find that dividends increase

with increase in the earnings (ER) and firm efficiency (Sales Emp). Consistent with La

Porta, Lopez-de-Silanes, Shleifer, and Vishny (2000), we find that non-privatized firms in

common law countries (COM), relative to civil law countries, pay higher dividends. An

important finding to note in Model II is that even after adding all these factors to the

regression model, the coefficient for the privatization dummy (PVT) remains positive and

significant.

Next, we add interaction variables to the model. After adding the interactions between

the privatization dummy and the other determinants of dividend policy, in Model III,

we find that the coefficient on privatization dummy (PVT) is no longer significant. The

loss of significance for the dummy (PVT) coefficient indicates that the positive relation

between dividends and privatization is likely to be driven by one of the other determinants

in the model. A closer examination of the results in Model III indicates a significant

positive relation between dividends and the earnings ratio (ER * PVT) and growth in sales

(G Sales * PVT) of privatized firms. These results show a strong relation between the

privatized firm’s decision to increase dividends and its improvement in performance and

23

efficiency post privatization. On the other hand, our results in Model III further show

that arguments based on the life-cycle or maturity hypothesis do not fit the privatized

firms in our sample. The interaction coefficients for the retained earnings to total equity

(RETE * PVT) is insignificant. The results are, however, consistent with the free cash

flows hypothesis. We find a significant relation between the privatized firm’s dividends

and the interaction coefficients for closely held shares (CLOSE * PVT). Furthermore, we

find a significant negative coefficient on the interaction between the privatization dummy

and the dummy for the common law countries (COM * PVT). It suggests that, in our

sample, privatized firms in the common law countries pay significantly lower dividends.

This finding for the privatized firms is consistent with the ‘substitute model’ suggested

by La Porta, Lopez-de-Silanes, Shleifer, and Vishny (2000). This hypothesis suggests that

dividends are a substitute for legal protection. Therefore, firms in countries with lower level

of protection to shareholders should pay higher dividends. As reported in Model IV, our

findings in respect to Model III are robust to the international variation over time of the

dividend tax penalty (Poterba and Summers, 1984, Jacob and Jacob, 2013).28 Specifically,

the dividend tax penalty (DTP) is associated with a significant, large (-0.328), and negative

influence of dividend pay outs internationally, however, there is no significant difference in

the magnitude of this effect across privatized and non-privatized firms (DTP * PVT).


Last, for robustness check, we repeat the analysis by separating the sample into sub-

samples based on extent of privatization, the level of regulation in the industry, and the

level of development in the country. The results for these sub-samples are reported in table

7. The findings for the sub-samples based on extent of privatization are reported in Panel A.

While we still find that the closely held shares (CLOSE * PVT) negatively affect the firms’

dividends, the coefficient on the common law dummy (COM * PVT) interaction variable is

negative but not significant. We find that the coefficient for the privatization dummy stays

significant even after adding the interactions with other factors in the model. In Panel

B, however, we show that while closely held shares (CLOSE * PVT) and growth in sales

28The same result holds using other proxies for the dividend tax viz. dividend tax preference (La Porta,Lopez-De-Silanes, Shleifer, and Vishny, 2000) and weighted average dividend tax (Becker, Jacob and Jacob,2013). The results are available from the authors on request.

24

(G Sales * PVT) are significant for privatizations in competitive industries (sectors with

relatively low levels of regulation), only the effects of earnings reporting frequency (ERF

* PVT) are significant for privatizations in the non-competitive industries. We do find a

significant and negative coefficient for the common law dummy (COM * PVT), reported

in Panel B (for privatizations in competitive industry sectors) and in Panel C. In non-

competitive industry sectors, therefore, our analysis suggest little by way of explanation for

the privatized firm payout premium. In Panel C, we also show that while cash (CASH *

PVT) positively influences pay out in emerging markets, the negative influence of closely

held shares arises principally in developed markets. The growth in sales (G Sales * PVT)

retains a positive influence on dividend pay outs in privatized firms in developed markets.

As reported in Model IV of each panel, our findings are also robust, across a sample of 17

countries, to the international variation over time of the dividend tax penalty; DTP * PVT

(Poterba and Summers, 1984, Jacob and Jacob, 2013).29


4.4 Additional tests

In the results discussed so far, we recognize that there is a significant difference in the sample

sizes of privatized and non-privatized firms. Therefore, we ask ourselves whether the results

are influenced by the difference in the sample sizes of these two groups. As a robustness

check, we create another control sample of non-privatized firms that is comparable to the

privatized firms in sample size. Specifically, for each privatized firm, we find one matching

non-privatized firm. We construct the one-to-one matched sample sequentially at the year

of privatization on the following criteria: country of origin, firm size (+/- 10%), cash

holdings (+/- 5%), and growth in total assets. We repeat the difference-in-differences

analysis reported in tables 6 and 7 using this control sample. Our difference-in-differences

findings in the matched sample are substantively identical to findings in the full sample of

firms. The findings are reported in Appendix 3 and 4 respectively.

29The same result holds using other proxies for the dividend tax; viz. dividend tax preference (La Porta,Lopez-De-Silanes, Shleifer, and Vishny, 2000) and weighted average dividend tax (Becker, Jacob and Jacob,2013). The results are available from the authors on request.

25

5 Conclusions

Since the rapid growth in privatizations of European firms during the 1980s and 1990s, the

effect of privatization on the firm’s financial performance, operating efficiency, and payout

decisions has been of great interest to researchers. Governments usually expect privatization

to increase the profitability and the operational efficiency of the firms. Consistent with those

expectations, prior studies document an improvement in firm performance, an increase in

capital spending, and a decrease in debt and ownership concentration post privatization.

Another significant impact of privatization is on the dividend policies of the firms. While

there are no explicit theoretical explanations as to why privatized firms exhibit higher

dividends pay outs, prior studies suggest that it could be a consequence of changes in

the ownership structure, shareholder preferences, and the resulting agency conflicts. The

pay outs by privatized firms increase markedly around the privatization event and are

significantly higher as compared to the non-privatized firms and hence the topic warrants

further research. Although the literature on privatization has grown rapidly, the question

as to why privatized firms pay such high dividends and what factors enable them to do so

are still unanswered. We attempt to fill this gap in the literature. From the viewpoints of

corporate officials who must set the payout policy, investors in respect to capital allocation

decisions, and economists seeking to understand the functioning of the capital markets,

an important question arises in respect to the determination of the privatized firm payout

decisions: Does the difference between the dividend pay outs of pre- and post-privatized

firms stem principally from differences in information asymmetries, incomplete contracting

possibilities, the phase of the financial life-cycle or taxes between the two groups?

When compared to non-privatized firms, we find that the privatized firms are not only

more profitable but also pay a higher proportion of their profits as dividends. Our find-

ings show a strong positive relation between the firm’s decision to pay dividends and its

profitability, growth in sales, and improvement in firm efficiency. Our findings show no

reduction in the privatized firm’s growth opportunities, sales growth, earnings growth,

market-to-book ratio, or cash reserves. We conclude that the life-cycle theory maturity

hypothesis does not explain the dividend premium paid by privatized firms. Instead, we

propose an agency costs type signalling based argument. Privatization leads to harsher

26

product market competition, higher capital market scrutiny, and a likely change in a firm’s

objective function along with significant change in the ownership structure, which in turn

could lead to an increase in the agency conflicts between various stakeholders. The man-

agement can send a costly signal, in a higher dividend pay out, to the market to mitigate

potential over-investment and other agency costs. We find a strong and consistent positive

relation between the firm’s dividends and its earnings, growth in sales, and operating effi-

ciency. Our results show that, after privatization, firms increase pay outs more in civil than

in common law countries which suggests a signal of reduced prospective agency costs to

protect minority shareholder, which is less necessary in common law countries. In addition,

we find a negative relation between the extent of closely held shares in privatized firms and

dividend pay outs, which is consistent with dividends potentially substituting for the moni-

toring activities of certain major shareholders. These findings are robust to different model

specifications. Therefore, we conclude that the commonly observed increase in dividends

immediately following privatization is mainly driven by improvements in profitability, firm

efficiency, growth opportunities, and a new incentive on firm management to reduce agency

costs.

27

References

[1] Aggarwal, R., Erel, I., Ferreira, M., Matos, P., 2011. Does governance travel aroundthe world? Evidence from institutional investors. Journal of Financial Economics 100,154-181.

[2] Allen, F., Michaely, R. 2003. Payout Policy. In: Constantinides, G., Harris, M., Stulz,R. (Eds.), Handbook of the Economics of Finance. Elsevier Science, Amsterdam.

[3] Ashenfelter, O., Card, D., 1985. Using the Longitudinal Structure of Earnings to Es-timate the Effect of Training Programs. The Review of Economics and Statistics, 67,648-660.

[4] Banyi, M., Kahle, K.M., 2013. Declining propensity to pay? A re-examination of thelife cycle theory. University of Arizona working paper series.

[5] Bhattacharya, S., 1979. Imperfect information, dividend policy, and the bird In thehand fallacy. Bell Journal of Economics 10, 259-70.

[6] Becker, B., Jacob, M., Jacob, M., 2013. Payout taxes and the allocation of investment.Journal of Financial Economics 107, 1-24.

[7] Benartzi, S., Grullon, G., Michaely, R., Thaler, R., 2005. Dividend changes do not signalchanges in future profitability. Journal of Business 78, 1659-1682.

[8] Boubakri, N., Cosset, J-C., 1998. The financial and operating performance of newlyprivatized firms: Evidence from developing countries. Journal of Finance 53, 1081-1110.

[9] Boubakri, N., Cosset, J-C., Guedhami, O., 2005. Liberalization, corporate governanceand the performance of privatized firms in developing countries. Journal of CorporateFinance 11, 767-790.

[10] Brav, A., Graham, J.R., Harvey, C.R., Michaely, R., 2005. Payout policy in the 21stcentury. Journal of Financial Economics 77, 483-527.

[11] Brockman, P., Unlu, E., 2009. Dividend policy, creditor rights and the agency costs ofdebt. Journal of Financial Economics 92, 276-299.

[12] Brockman, P., Unlu, E., 2011. Earned/contributed capital, dividend policy, and dis-closure quality: An international study. Journal of Banking and Finance 35, 1610-1625.

[13] Bushman, R., Piotroski, J., Smith, A., 2004. What determines corporate transparency?Journal of Accounting Research 42, 207-252.

[14] Chay, J.B., Suh. J, 2009. Payout policy and cash-flow uncertainty. Journal of FinancialEconomics 93, 88-107.

[15] DeAngelo, H., DeAngelo, L., Skinner, D.J., 2004. Are dividends disappearing? Div-idend concentration and the consolidation of earnings. Journal of Financial Economics72, 425-456.

28

[16] DeAngelo, H., DeAngelo, A., Stulz, R.M., 2006. Dividend policy and theearned/contributed capital mix: A test of the lifecycle theory. Journal of Financial Eco-nomics 81, 227-254.

[17] Denis, D.J., Osobov, I., 2008. Why do firms pay dividends? International evidence onthe determinants of dividend policy. Journal of Financial Economics 89, 62-82.

[18] D’Souza, J., Megginson, W.L., 1999. The financial and operating performance of pri-vatized firms during the 1990s. Journal of Finance 54, 1397-1438.

[19] D’Souza, J., Megginson, W.L., Nash, R., 2005. Effect of institutional and firm-specificcharacterstics on post-privatization performance: Evedence from developed countries.Journal of Corporate Finance 11, 747-766.

[20] Easterbrook, F.H., 1984. Two agency-cost explanations of dividends. The AmericanEconomic Review 74, 650-659.

[21] von Eije, H.J., Goyal, A., Muckley, C., 2014. Does the information content of payoutinitiations and omissions influence firm risks? Journal of Econometrics, forthcoming.

[22] von Eije, H.J., Megginson, W.L., 2008. Dividends and share repurchases in the Euro-pean Union. Journal of Financial Economics 89, 347-374.

[23] Fama, E.F., French, K.R., 2001. Disappearing dividends: Changing characteristics orlower propensity to pay?. Journal of Financial Economics 60, 3-43.

[24] Grullon, G., Michaely, R., Swaminathan, B., 2002. Are dividend changes a sign of firmmaturity. Journal of Business 75, 387-424.

[25] Harford, J., Mansi, S.A., Maxwell, W.F., 2008. Corporate governance and firm cashholdings in the US, Journal of Financial Economics 87, 535-555.

[26] Healy, P.M., Palepu, K.G., 1988. Earnings information conveyed by dividend initiationsand omissions. Journal of Financial Economics 21, 149-176.

[27] Jacob, M., Jacob, M., 2013. Taxation, dividends, and share repurchases: Taking evi-dence global. Journal of Financial and Quantitative Analysis forthcoming.

[28] Jensen, M.C., 1986. Agency costs of free cash flow, corporate finance and takeovers.American Economic Review 76, 323-329.

[29] Jensen, M.C., Meckling, W.H., 1976, Theory of the firm: managerial behavior, agencycosts and ownership structure. Journal of Financial Economics 3, 305-360.

[30] John, K., Williams, J., 1985. Dividends, dilution and taxes: A signaling equilibrium.Journal of Finance 40, 1053-1070.

[31] Jones, S.L., Megginson, W.L., Nash, R.C., Netter, J.M., 1999. Share issue privatiza-tions as financial means to political and economic ends. Journal of Financial Economics53, 217-253.

[32] La Porta, R., Lopez-de Silanes, F., Shleifer, A., Vishny, R.W., 1997. Legal determinantsof external finance. Journal of Finance 52, 1131-1150.

29

[33] La Porta, R., Lopez-de Silanes, F., Shleifer, A., Vishny, R.W., 2000. Agency problemsand dividend policies around the world. Journal of Finance 55, 1-33.

[34] Lang, L.H.P., Litzenberger, R.H., 1989. Dividend announcement: Cash flow signallingvs. free cash flow hypothesis? Journal of Financial Economics 24, 181-191.

[35] Lintner, J., 1956. Distribution of incomes of corporations among dividends, retainedearnings, and taxes. American Economic Review 46, 97-113.

[36] Megginson, W.L., Nash, R.C., van Randenborgh, M., 1994. The financial and operatingperformance of newly privatized firms: An international empirical analysis. Journal ofFinance 49, 403-452.

[37] Megginson, W.L., Netter, J.M., 2001. From state to market: A survey of empiricalstudies on privatization. Journal of Economic Literature 39, 321-389.

[38] Michaely, R., Thaler, R.H., Womack, K.L., 1995. Price reactions to dividend initiationsand omissions: Overreaction or drift? Journal of Finance 50, 573-608.

[39] Miller, M.H., Modigliani, F., 1961. Dividend policy, growth, and the valuation ofshares. Journal of Business 34, 411-433.

[40] Miller, M.H., Rock, K., 1985. Dividend policy under asymmetric information. Journalof Finance 40, 1031-1051.

[41] Pinkowitz, L., Stulz, R., Williamson, R., 2006. Does the contribution of corporate cashholdings and dividends to firm value depend on governance? A cross-country analysis.Journal of Finance 61, 2725-2751.

[42] Poterba, J.M., Summers, L.H., 1984. New evidence that taxes affect the valuation ofdividends. Journal of Finance 39, 13971415.

[43] Watts, R., 1973. The information content of dividends. Journal of Business 46, 191-211.

[44] Wood, A., 2001. Death of the dividend? CFO Europe research report. The EconomistGroup, London.

30

Fig

ure

1:T

he

grow

thop

por

tun

itie

sof

new

lyp

riva

tize

dfi

rms

are

pro

xie

dby

the

mar

ket

tob

ook

valu

e(M

TBV

),gro

wth

into

tal

asse

ts(G

TA

)an

dsa

les

grow

th(G

Sales)

and

pro

fita

bil

ity

ofth

ese

firm

sis

pro

xie

dby

the

scal

edea

rnin

gs

(ER

).T

he

tim

esc

ale

isfr

om3

yea

rsp

re-

to3

year

sp

ost-

the

year

ofp

riva

tiza

tion

,ye

ar0.

Th

ed

ata

issa

mp

led

from

Sta

teO

wn

edE

nte

rpri

sers

in26

cou

ntr

ies

from

1990

to20

11fo

rfi

rms

pri

vati

zed

bet

wee

n19

92an

d20

09.

31

Table 1This table presents summary statistics for the proxy variables (firm characteristics) used in this studyto compare the firm-specific characteristics 3-years before and 3-years after privatization for 121 newlyprivatized firms across 26 countries from 1990 to 2011 for the firms privatized between 1992 and 2009. Alldata are sourced in Worldscope. N refers to the number of firm year observations available for the respectivevariables. Expected change refers to the anticipated change in proxy variable after privatization. It relatesto both Sign and Proportion. Sign refers to the expected sign of the difference in mean and median proxyvariable values after privatization. Proportion refers to the percentage of firms whose proxy values changeas expected as well as a test of significance of this change (Z-statistics). Before and After refers to themean and median values of the proxy variables for the three-year periods before and after privatization.Difference refers to the difference in mean and median values for 3-years after privatization minus mean andmedian values for 3-years before privatization. Difference in mean between the pre and post privatizationfirm-specific characteristics for privatized firms is calculated by using a two-sample mean-comparison test(T-statistics). Difference in median between the pre and post privatization firm-specific characteristics forprivatized firms is calculated by using a Wilcoxon signed rank test (Z-statistics). We use the country specificconsumer price indices to deflate the nominal firm specific accounting and financial data into real 1990 prices.The proxy variables have been converted from local currency to US$ by using the year-end conversion rate.For a definition of the proxy variables please refer to Appendix 1.

Variables N Expected change Mean MedianSign Proportion Before After Difference Before After Difference

Payout

DIV 117 (+) 0.77a 102.12 205.59 103.47a 11.67 30.23 18.56a

DIV EBIAT 117 (+) 0.64a 0.22 0.27 0.05 0.14 0.24 0.10b

DIV NI 117 (+) 0.60b 0.00 0.48 0.48c 0.22 0.36 0.14b

SizeMV 92 (+) 0.71a 7368.34 10103.89 2735.55c 1466.09 1697.85 231.75a

SIZE 92 (+) 0.61b 75.80 78.80 3.00a 83.40 86.66 3.26a

Profitability

ER 121 (+) 0.66a 4.20 6.06 1.86a 5.79 6.46 0.67a

Liquidity

RETE 111 (+) 0.64a -6.29 20.52 26.81c 11.76 20.88 9.12a

CASH 121 (+) 0.48 25.97 25.64 -0.33 22.46 21.97 -0.49Ownership

CLOSE 94 (-) 0.68a 74.67 52.66 -21.99a 66.85 52.16 -14.69a

RiskNI Risk 121 (+) 0.60b 0.07 0.11 0.04c 0.03 0.04 0.01a

GrowthG TA 105 (+) 0.63b 10.30 14.64 4.34a 7.94 11.25 3.31a

MTBV 92 (+) 0.53 3.26 2.77 0.49 1.67 1.69 0.02G Sales 105 (+) 0.68b 11.51 16.70 5.19a 7.71 10.25 2.54b

Leverage

LR 121 (-) 0.46 22.21 22.76 0.56 19.85 20.24 0.39Reporting

ERF 120 (+) 0.88a 1.90 2.68 0.78a 1.59 2.67 1.08a

Efficiency

Sales Emp 99 (+) 0.76a 0.39 0.55 0.16c 0.19 0.22 0.03a

Emp 99 (-) 0.48 32505.10 31743.24 -761.86c 6374.67 6580.00 205.33b

a, b, c represents significance at the 1%, 5% and 10% levels respectively.

32

Tab

le2

This

table

pre

sents

sum

mary

stati

stic

sfo

rpro

xy

vari

able

sfo

rpri

vati

zed

firm

sunder

diff

eren

tca

tegori

es:

contr

ol

and

reven

ue

pri

vati

zati

ons,

com

pet

itiv

eand

non-c

om

pet

itiv

ese

ctors

,and

emer

gin

gand

dev

elop

edm

ark

ets.

The

sam

ple

isacr

oss

26

countr

ies

from

1990

to2011

for

the

firm

spri

vati

zed

bet

wee

n1992

and

2009.

All

data

are

sourc

edin

Worl

dsc

op

e.P

anel

Apre

sents

per

form

ance

changes

for

Contr

ol

pri

vati

zati

on

-w

her

egov

ernm

ents

reduce

thei

rst

ock

hold

ing

tob

elow

50%

and

Rev

enue

pri

vati

zati

on

-w

her

egov

ernm

ent

reta

ins

majo

rity

owner

ship

,i.e.

,m

ore

than

50%

owner

ship

.W

eco

mpare

the

firm

-sp

ecifi

cch

ara

cter

isti

cs3-y

ears

bef

ore

and

3-y

ears

aft

erpri

vati

zati

on

for

121

new

lypri

vati

zed

firm

s-

38

Contr

ol

pri

vati

zati

ons

(Cont.

)and

83

Rev

enue

pri

vati

zati

ons

(Rev

.).

Panel

Bpre

sents

firm

chara

cter

isti

cch

anges

for

firm

sop

erati

ng

inco

mp

etit

ive

indust

ries

-th

ose

that

are

sub

ject

toin

tern

ati

onal

pro

duct

mark

etco

mp

etit

ion

and

non-c

om

pet

itiv

ein

dust

ries

(pri

nci

pally

financi

al

inst

ituti

ons,

banks,

and

uti

liti

es)

-th

ose

indust

ries

that

are

rela

tivel

yfr

eeof

pro

duct

mark

etco

mp

etit

ion.

We

com

pare

the

firm

spec

ific

chara

cter

isti

cs3-y

ears

bef

ore

and

3-y

ears

aft

erpri

vati

zati

on

for

121

new

lypri

vati

zed

firm

s-

90

com

pet

itiv

ein

dust

rypri

vati

zati

ons

(Com

p.)

and

31

non-c

om

pet

itiv

ein

dust

rypri

vati

zati

ons

(Non-C

om

p.)

.P

anel

Cpre

sents

firm

sop

erati

ng

inem

ergin

gco

untr

ies

ver

sus

firm

sop

erati

ng

indev

elop

edco

untr

ies.

We

com

pare

the

firm

-sp

ecifi

cch

ara

cter

isti

cs3-y

ears

bef

ore

and

3-y

ears

aft

erpri

vati

zati

on

for

121

new

lypri

vati

zed

firm

s-

42

emer

gin

gm

ark

etpri

vati

zati

on

(Em

er.)

and

79

dev

elop

edm

ark

etpri

vati

zati

on

(Dev

.).

Nre

fers

toth

enum

ber

of

firm

yea

robse

rvati

ons

available

.E

xp

ecte

d(P

osi

tive

/N

egati

ve)

refe

rsto

the

anti

cipate

dch

ange

inpro

xy

vari

able

aft

erpri

vati

zati

on,

i.e.

,th

eex

pec

ted

sign

of

the

diff

eren

cein

mea

nand

med

ian

valu

esaft

erpri

vati

zati

on.

Pro

p.

refe

rsto

the

pro

port

ion

of

firm

sw

hose

pro

xy

valu

esch

ange

as

exp

ecte

das

wel

las

ate

stof

signifi

cance

of

this

change

(Z-s

tati

stic

s).

Diff

eren

cere

fers

toth

ediff

eren

cein

mea

nand

med

ian

valu

esfo

r3-y

ears

aft

erpri

vati

zati

on

min

us

mea

nand

med

ian

valu

esfo

r3-y

ears

bef

ore

pri

vati

zati

on,

resp

ecti

vel

y.D

iffer

ence

inm

ean

bet

wee

nth

epre

-and

post

-pri

vati

zati

on

firm

-sp

ecifi

cch

ara

cter

isti

csfo

rpri

vati

zed

firm

sis

calc

ula

ted

by

usi

ng

atw

o-s

am

ple

mea

n-c

om

pari

son

test

(T-s

tati

stic

s).

Diff

eren

cein

med

ian

bet

wee

nth

epre

and

post

pri

vati

zati

on

firm

-sp

ecifi

cch

ara

cter

isti

csfo

rpri

vati

zed

firm

sis

calc

ula

ted

by

usi

ng

aW

ilco

xon

signed

rank

test

(Z-s

tati

stic

s).

We

use

the

countr

ysp

ecifi

cco

nsu

mer

pri

cein

dic

esto

defl

ate

the

nom

inal

firm

spec

ific

acc

ounti

ng

and

financi

al

data

into

real

1990

pri

ces.

All

the

pro

xy

vari

able

shav

eb

een

conver

ted

from

loca

lcu

rren

cyto

US$

by

usi

ng

the

yea

r-en

dco

nver

sion

rate

.F

or

adefi

nit

ion

of

the

pro

xy

vari

able

sple

ase

refe

rto

App

endix

1.

Pan

elA

:C

ontr

ol

an

dR

even

ue

Pri

vati

zati

on

Pan

elB

:C

om

pet

itiv

ean

dN

on

-Com

pet

itiv

eF

irm

sP

an

elC

:E

mer

gin

gan

dD

evel

op

edC

ou

ntr

ies

Vari

ab

les

NP

rop

.D

iffer

ence

Diff

eren

ceN

Pro

p.

Diff

eren

ceD

iffer

ence

NP

rop

.D

iffer

ence

Diff

eren

ce(E

xp

ecte

d)

of

mea

nof

med

ian

of

mea

nof

med

ian

inm

ean

inm

edia

n

Payou

t

DIV

Cont.

38

0.6

5b

52.5

1a

10.2

9b

Com

p.

87

0.7

8a

81.8

3a

18.5

9a

Em

er.

41

0.6

6b

54.0

7a

8.8

0a

(Posi

tive)

Rev

.79

0.8

3a

127.9

9a

19.1

2a

Non

-Com

p.

30

0.7

7a

166.2

5c

43.0

7a

Dev

.76

0.8

4a

130.1

3a

21.6

5a

DIV

EB

IAT

Cont.

38

0.6

6b

0.0

30.0

8C

om

p.

87

0.6

6a

0.0

50.0

9b

Em

er.

41

0.5

90.0

90.1

2(P

osi

tive)

Rev

.79

0.6

3b

0.0

60.1

1c

Non

-Com

p.

30

0.6

00.0

40.1

0D

ev.

76

0.6

7a

0.0

30.1

0a

DIV

NI

Cont.

38

0.6

8b

0.3

40.1

2C

om

p.

87

0.6

1b

0.6

5c

0.1

6b

Em

er.

41

0.5

10.0

30.1

6(P

osi

tive)

Rev

.79

0.5

70.5

50.1

2c

Non

-Com

p.

30

0.6

00.0

10.0

8D

ev.

76

0.6

6a

0.7

3c

0.1

2b

Siz

eM

VC

ont.

27

0.5

6-1

786.4

083.1

1C

om

p.

69

0.7

2a

2481.4

7369.6

3a

Em

er.

32

0.4

7-1

502.5

4-2

76.7

1(P

osi

tive)

Rev

.65

0.7

8a

4613.9

0a

323.7

7a

Non

-Com

p.

23

0.7

0b

3497.7

91445.2

2b

Dev

.60

0.8

5a

4995.8

6a

923.8

4a

SIZ

EC

ont.

27

0.5

92.6

18.5

7C

om

p.

69

0.6

1c

3.1

8a

5.0

2b

Em

er.

32

0.4

40.5

41.7

9(P

osi

tive)

Rev

.65

0.6

3b

3.1

6a

4.1

5a

Non

-Com

p.

23

0.6

52.4

7b

2.9

2c

Dev

.60

0.7

2a

4.3

1a

6.0

9a

Pro

fita

bilit

y

ER

Cont.

38

0.7

0a

4.5

1b

0.8

3a

Com

p.

90

0.6

3b

1.2

1c

0.5

5b

Em

er.

42

0.5

8c

3.7

3b

0.3

7c

(Posi

tive)

Rev

.83

0.6

5b

2.6

4b

0.5

7a

Non

-Com

p.

31

0.7

8a

2.0

8a

0.7

3a

Dev

.78

0.6

8b

4.8

3a

0.5

1b

a,

b,

cre

pre

sents

sign

ifica

nce

at

the

1%

,5%

an

d10%

level

sre

spec

tivel

y.

33

Tab

le2

contd

. Pan

elA

:C

ontr

ol

an

dR

even

ue

Pri

vati

zati

on

Pan

elB

:C

om

pet

itiv

ean

dN

on

-Com

pet

itiv

eF

irm

sP

an

elC

:E

mer

gin

gan

dD

evel

op

edC

ou

ntr

ies

Vari

ab

les

NP

rop

.D

iffer

ence

Diff

eren

ceN

Pro

p.

Diff

eren

ceD

iffer

ence

NP

rop

.D

iffer

ence

Diff

eren

ce(E

xp

ecte

d)

of

mea

nof

med

ian

of

mea

nof

med

ian

inm

ean

inm

edia

n

Liq

uid

ity

RE

TE

Cont.

37

0.6

5c

23.0

513.1

0c

Com

p.

81

0.6

5a

32.4

3c

8.1

9a

Em

er.

37

0.5

7-1

.02

12.6

4(P

osi

tive)

Rev

.74

0.6

5a

28.7

07.2

4a

Non

-Com

p.

30

0.6

311.6

7c

15.8

3c

Dev

.74

0.6

9a

40.7

4b

8.3

5a

CA

SH

Cont.

38

0.5

02.0

45.1

0C

om

p.

90

0.5

00.6

00.9

8E

mer

.42

0.5

20.0

51.3

1(P

osi

tive)

Rev

.83

0.4

8-1

.41

-3.6

0N

on

-Com

p.

31

0.4

5-3

.01

-3.7

5D

ev.

79

0.4

7-0

.53

-0.5

0O

wn

ersh

ip

CL

OS

EC

ont.

28

0.7

2a

-18.4

0a

-20.9

4b

Com

p.

70

0.6

7a

-9.0

3a

-8.9

9a

Em

er.

28

0.6

8b

-9.4

3a

-2.3

2c

(Neg

ati

ve)

Rev

.66

0.6

7b

-5.3

9a

-10.5

6a

Non

-Com

p.

24

0.7

1b

-18.6

0a

-4.8

2b

Dev

.66

0.6

8a

-12.6

9a

-14.9

7a

Ris

kN

IR

isk

Cont.

38

0.6

1b

0.1

0c

0.0

1c

Com

p.

90

0.5

8b

0.0

5c

0.0

1b

Em

er.

42

0.3

80.0

20.0

3b

(Posi

tive)

Rev

.83

0.6

0b

0.0

10.0

1N

on

-Com

p.

31

0.6

8a

0.0

10.0

2D

ev.

79

0.4

1c

0.0

40.0

0b

Gro

wth

GT

AC

ont.

34

0.6

9a

1.9

8b

4.0

1a

Com

p.

79

0.6

8b

3.6

0b

0.1

5E

mer

.35

0.8

3a

14.2

0b

8.7

3a

(Posi

tive)

Rev

.71

0.7

1a

4.8

2a

3.1

1a

Non

-Com

p.

26

0.7

7a

7.1

3a

9.8

5a

Dev

.70

0.5

41.0

42.2

4M

TB

VC

ont.

27

0.5

22.8

50.0

0C

om

p.

69

0.5

40.5

5-0

.05

Em

er.

32

0.4

4-0

.39

-0.1

7(P

osi

tive)

Rev

.65

0.5

4-0

.49

0.0

2N

on

-Com

p.

23

0.5

20.3

2-0

.11

Dev

.60

0.5

80.9

60.0

6c

GS

ale

sC

ont.

34

0.6

1a

7.2

2a

5.2

5a

Com

p.

79

0.6

6b

4.2

6a

3.8

3b

Em

er.

35

0.7

6a

17.1

3a

15.9

4a

(Posi

tive)

Rev

.71

0.6

2b

8.8

2a

0.3

1N

on

-Com

p.

26

0.6

9b

8.8

4a

7.3

9a

Dev

.70

0.5

00.3

12.7

7L

ever

age

LR

Cont.

38

0.3

9-0

.82

-2.6

4C

om

p.

90

0.5

0-1

.18

-1.7

4E

mer

.42

0.2

97.6

1a

8.0

5a

(Neg

ati

ve)

Rev

.83

0.4

81.1

91.7

3N

on

-Com

p.

31

0.3

25.5

9a

6.7

0b

Dev

.79

0.5

4-3

.19

-4.1

8R

eport

ing

ER

FC

ont.

37

0.9

4a

0.9

6a

1.0

0a

Com

p.

90

0.8

7a

0.6

8a

0.8

3a

Em

er.

42

0.8

3a

0.8

8a

1.6

7a

(Posi

tive)

Rev

.83

0.8

5a

0.7

0a

0.6

7a

Non

-Com

p.

30

0.9

3a

1.1

0a

1.6

7a

Dev

.78

0.9

1a

0.7

3a

0.8

4a

Effi

cien

cy

Sale

sE

mp

Cont.

30

0.7

6a

0.1

20.0

4a

Com

p.

75

0.7

5a

0.1

40.0

3a

Em

er.

26

0.7

3a

0.2

70.0

5c

(Posi

tive)

Rev

.69

0.8

6a

0.1

7c

0.0

2a

Non

-Com

p.

24

0.8

3a

0.2

3b

0.1

1a

Dev

.73

0.7

8a

0.1

20.0

4a

Em

pC

ont.

30

0.5

01845.4

417.3

3C

om

p.

75

0.4

7-2

09.4

0-6

04.3

3E

mer

.26

0.5

8-1

795.0

4-8

59.1

7(N

egati

ve)

Rev

.69

0.4

6-1

895.4

7984.0

0N

on

-Com

p.

24

0.5

0-2

488.3

2639.0

0D

ev.

73

0.4

4-3

93.8

8-1

25.0

0

a,

b,

cre

pre

sents

sign

ifica

nce

at

the

1%

,5%

an

d10%

level

sre

spec

tivel

y.

34

Table 3This table presents the annual time-series of the number of usable observations (N), the proportion ofdividend payers (Prop.) as a fraction of firms that disclose their dividend payout, the arithmetic mean(Mean) and the median (Median) values of dividend, DIV, pay out for each year - 1990 to 2011 for theprivatized and non-privatized firms. All data are sourced in Worldscope. All the DIV observations havebeen converted from local currency to US$ by using the year-end conversion rate. We test the significanceof the changes in the proportions, arithmetic means, and medians of cash dividend pay out for each yearbetween the privatized and non-privatized firms. We employ the two-sample mean-comparison tests (withT-statistics) as our test for significance for the difference in proportions and mean payout amounts of payers.We employ the Wilcoxon signed rank test (with its Z-statistics) as our test of significance for the change inmedian values of DIV between the privatized and non-privatized firms.

Year Privatized firms Non-privatized firms Difference inN Prop. Mean Median N Prop. Mean Median Prop. Mean Median

1990 128 0.85 39.22 6.42 1899 0.87 21.43 2.61 -0.02 17.79b 3.81a

1991 133 0.83 38.59 6.55 2047 0.85 20.95 2.44 -0.02 17.64b 4.11a

1992 141 0.80 40.34 6.41 2170 0.83 19.48 2.22 -0.03 20.85a 4.19a

1993 151 0.79 41.24 5.23 2274 0.79 16.55 1.69 0.00 24.68a 3.54a

1994 158 0.77 46.00 5.72 2392 0.80 18.81 2.02 -0.03 27.18a 3.70a

1995 175 0.81 61.45 9.81 2559 0.81 22.59 2.50 -0.01 38.85a 7.31a

1996 202 0.80 65.76 7.76 2966 0.78 23.26 2.16 0.02 42.49a 5.60a

1997 216 0.79 69.09 7.84 3162 0.77 21.94 1.88 0.02 47.15a 5.95a

1998 233 0.79 76.58 7.72 3299 0.75 25.83 1.73 0.03 50.75a 5.99a

1999 254 0.76 89.19 7.84 3474 0.70 27.79 1.31 0.05c 61.39a 6.53a

2000 272 0.71 84.36 5.01 3801 0.67 21.69 1.06 0.04 62.66a 3.95a

2001 279 0.68 95.33 4.43 4012 0.64 25.34 0.82 0.05 69.98a 3.61a

2002 294 0.65 93.17 2.75 4166 0.59 23.23 0.53 0.06 69.94a 2.21a

2003 311 0.61 100.55 2.06 4345 0.57 27.00 0.50 0.04c 73.54a 1.56a

2004 329 0.60 143.85 2.44 4527 0.57 33.12 0.57 0.03 110.73a 1.87a

2005 331 0.62 158.79 3.60 4624 0.58 33.20 0.72 0.04 125.58a 2.88a

2006 328 0.66 210.93 5.89 4665 0.60 44.39 0.87 0.06b 166.53a 5.01a

2007 322 0.67 254.29 8.35 4518 0.61 58.84 1.29 0.05b 195.44a 7.06a

2008 310 0.65 273.34 8.50 4380 0.63 58.66 1.54 0.02b 214.68a 6.96a

2009 303 0.64 250.81 4.25 4238 0.59 55.30 0.91 0.05b 195.51a 3.34a

2010 288 0.68 249.37 6.03 4101 0.58 54.91 0.89 0.09a 194.46a 5.14a

2011 248 0.73 305.47 13.91 3587 0.63 73.34 1.88 0.09a 232.13a 12.02a

1990 - 5406 0.72 143.59 5.82 77206 0.64 35.50 1.31 0.08a 108.09a 4.51a

2011


35

Table 4This table presents summary statistics for the set of proxy variables (firm characteristics) in privatized andnon-privatized firms in 26 countries from 1990 to 2011. All data are sourced in Worldscope. N refers to thenumber of firm-year observations available for the respective variable in each category. Mean and medianare the arithmetic average and median value for each proxy variable. We use the country specific consumerprice indices to deflate the nominal firm specific accounting and financial data into real 1990 prices. Allthe proxy variables have been converted from local currency to US$ by using the year-end conversion rate.Difference in mean between the mean of the privatized and non-privatized firm-specific characteristics iscalculated by using a two-sample mean-comparison test (T-statistics). Difference in median between themedian of the privatized and non-privatized firm-specific characteristics is calculated by using a Wilcoxonsigned rank test (Z-statistics). For a definition of the proxy variables please refer to the Appendix 1.

Variables Privatized firms Non-privatized firms Difference inN Mean Median N Mean Median Mean Median

PayoutDIV 5406 143.59 5.82 77206 35.50 1.31 108.09a 4.51a

DIV EBIAT 5401 0.24 0.15 76903 0.26 0.14 -0.01 0.01a

DIV NI 5403 0.49 0.22 77036 0.49 0.18 0.00 0.04a

SizeMV 5208 5127.32 439.36 75534 4171.05 129.13 956.28 310.23a

SIZE 5208 64.73 71.42 75534 48.98 48.68 15.75a 22.74a

ProfitabilityER 5579 4.56 6.00 79571 3.22 5.72 1.35a 0.28a

LiquidityRETE 5291 -8.96 18.12 75444 -11.54 20.56 2.58 -2.44a

CASH 5552 25.95 19.86 78665 26.57 18.75 -0.62b 1.10a

OwnershipCLOSE 4405 62.24 62.03 63899 46.31 48.79 15.92a 13.24a

RiskNI Risk 6020 0.25 0.03 86249 1.11 0.03 -0.86a 0.00GrowthG TA 5280 10.99 7.55 75101 11.70 7.71 -0.70 -0.16MTBV 5189 2.31 1.56 75312 1.94 1.52 0.37 0.04c

G Sales 5246 11.47 9.97 73524 10.63 9.16 0.84 0.81a

LeverageLR 5581 22.78 21.30 79635 21.05 18.64 1.73a 2.66a

ReportingERF 5607 2.68 2.00 80778 2.52 2.00 0.16a 0.00EfficiencySales Emp 4668 0.57 0.20 63799 0.47 0.17 0.10 0.03Emp 4669 19588.00 3061.00 63915 7238.00 1021.00 12349.44a 2040.00a


36

Table 5This table presents the difference in coefficients in the 3-year pre and 3-year post firm characteristics on(the natural log of) cash dividends paid, DIV, by 92 firms (due to a data limitation) from 26 countriesthat were privatized from 1990 to 2011. A random effects panel regression model is employed to estimatethe coefficients. The values in ‘Coeff.’ column corresponds to the regression coefficient of each explanatoryvariable and ‘P-Val.’ corresponds to the level of significance of the Z-value calculated using a robust standarderrors at the firm-level. The dummy variable equals to 1 for the 3-year post privatization period and zerofor the 3-year pre privatization period. All independent variables are multiplied with this dummy and thecorresponding coefficient is indicated as ‘Diff.’ along with the respective p-value ‘P-Val.’. Hence, the ‘Diff.’column corresponds to the difference of 3-year pre privatization from 3-year post privatization regressioncoefficients and the adjacent p-value column indicates the level of significance in difference between 3-yearpre and 3-year post privatization. The latter model is extended in panel B to include a dividend tax penaltyvariable (Poterba and Summers, 1984) and this reduces sample size due to the exclusion of firms in certaincountries detailed in Appendix 1. We use the natural logarithm of certain firm-specific proxy variablesdenoted by ‘Ln ’. We control for the firm-level industry fixed effects and year fixed effects in the regressionmodel. Observation is the number of firm-average observations. Firms is the number of firms for whichobservations are available. R2 overall is the overall R-squared statistic. For a definition of the proxy variablesplease refer to Appendix 1.

Panel A: Privatized Firms Panel B: Countries with dataon Dividend Tax Penalty (DTP)

Variables Coeff. P-Val. Diff. P-Val. Coeff. P-Val. Diff. P-Val.

SIZE 0.022 0.022 0.027 0.029 0.018 0.119 0.019 0.206ER -0.016 0.435 0.051 0.028 -0.004 0.853 0.055 0.052RETE 0.006 0.022 -0.004 0.273 0.007 0.038 -0.005 0.243CASH 0.004 0.509 -0.004 0.649 0.010 0.235 0.000 0.982CLOSE -0.006 0.277 -0.007 0.263 -0.006 0.437 -0.007 0.377NI Risk 0.718 0.003 -0.305 0.788 0.762 0.003 -0.218 0.872G TA 0.014 0.014 -0.041 0.000 0.013 0.054 -0.040 0.001MTBV -0.039 0.398 0.006 0.898 -0.040 0.511 0.044 0.544G Sales -0.012 0.018 0.028 0.010 -0.010 0.097 0.022 0.074LR -0.014 0.088 0.011 0.318 -0.011 0.277 0.027 0.043ERF 0.166 0.177 -0.260 0.079 0.212 0.195 -0.189 0.318Ln Sales Emp 0.563 0.001 -0.150 0.455 0.497 0.015 -0.276 0.328Ln EMP 0.405 0.004 -0.209 0.204 0.440 0.006 -0.166 0.414COM -0.384 0.346 -0.168 0.653 0.341 0.515 -0.431 0.439DTP -1.881 0.040 -0.301 0.807Constant -8.402 0.002 2.629 0.399 -7.988 0.008 3.893 0.329

Observation 182 140Firms 92 70R2 overall 0.727 0.800Ind. fixed effects Yes Yes

37

Table 6This table presents results for the random effects panel regressions for the (natural log of the) real amountspaid as cash dividends, DIV, by privatized and non-privatized firms (26 countries, 1990 to 2011) on a wideset of payout determinants. The values in the Coeff. column correspond to the regression coefficients of eachexplanatory variable and P-Val. corresponds to the level of significance of the Z-value calculated using robuststandard errors at the firm-level. In Model I, only the privatization dummy, PVT is used as an explanatoryvariable. In Model II, the full set of determinants are included. In Model III, interaction variables withthe privatization dummy variable, PVT, are also included. In Model IV, the latter model is extended toinclude a dividend tax penalty variable (Poterba and Summers, 1984) and this reduces sample size due tothe exclusion of firms in certain countries detailed in Appendix 1. To reduce the endogeneity problem theindependent variables, except for the time invariant dummies (COM & PVT) and the YEAR variables, arelagged by one year. Independent variables succeeded by ‘* PVT’ refer to the interaction between firm-specificcharacteristics and the PVT dummy. Hence, we adopt a parametric dummy variable difference-in-differencesprocedure. We use the natural logarithm of the firm-specific proxy variables denoted by ‘Ln ’. We controlfor the firm-level industry fixed effects and year fixed effects in the four regression models. Observation isthe number of firm-year observations. Firms is the number of firms for which observations were available.R2 overall is the overall R-squared statistic. For a definition of the proxy variables please refer to Appendix1.

Model I Model II Model III Model IVVariables Coeff. P-Val. Coeff. P-Val. Coeff. P-Val. Coeff. P-Val.

SIZE 0.031 0.000 0.031 0.000 0.032 0.000ER 0.010 0.000 0.010 0.000 0.009 0.000RETE -0.001 0.000 -0.001 0.000 -0.001 0.000CASH 0.002 0.000 0.002 0.000 0.001 0.003CLOSE -0.003 0.000 -0.003 0.000 -0.003 0.000NI Risk 0.051 0.000 0.049 0.000 0.046 0.000G TA 0.000 0.121 0.000 0.144 -0.001 0.009MTBV -0.022 0.000 -0.024 0.000 -0.021 0.000G Sales 0.000 0.105 0.000 0.034 0.000 0.111LR -0.008 0.000 -0.008 0.000 -0.007 0.000ERF -0.024 0.002 -0.027 0.000 -0.014 0.123Ln Sales Emp 0.129 0.000 0.125 0.000 0.094 0.000Ln EMP 0.256 0.000 0.253 0.000 0.250 0.000COM 0.164 0.000 0.176 0.000 0.117 0.001YEAR 0.034 0.000 0.033 0.000 0.036 0.000DTP -0.329 0.000PVT 0.696 0.000 0.213 0.001 -0.659 0.516 0.058 0.949SIZE * PVT 0.004 0.238 0.001 0.827ER * PVT 0.008 0.060 0.006 0.142RETE * PVT 0.000 0.529 0.000 0.690CASH * PVT 0.002 0.280 0.001 0.601CLOSE * PVT -0.003 0.065 -0.004 0.038NI Risk * PVT 0.051 0.401 0.034 0.547G TA * PVT -0.001 0.412 -0.001 0.158MTBV * PVT 0.022 0.267 0.028 0.080G Sales * PVT 0.002 0.053 0.002 0.028LR * PVT -0.003 0.352 -0.004 0.347ERF * PVT 0.034 0.348 0.021 0.624Ln Sales Emp * PVT 0.042 0.545 -0.010 0.871Ln EMP * PVT 0.020 0.707 0.046 0.395COM * PVT -0.177 0.018 -0.299 0.052DTP * PVT -0.249 0.376Constant 0.954 0.000 -70.853 0.000 -70.324 0.000 -74.056 0.000

Observation 82607 46503 46503 38589Firms 6602 5916 5916 4606R2 overall 0.060 0.642 0.643 0.672Year fixed effects Yes Yes Yes YesInd. fixed effects Yes Yes Yes Yes

38

Tab

le7

Th

ista

ble

pre

sents

resu

lts

for

the

ran

dom

effec

tsp

an

elre

gre

ssio

ns

for

the

(natu

ral

log

of

the)

real

am

ou

nts

paid

as

cash

div

iden

ds,

DIV

,by

pri

vati

zed

an

dn

on

-pri

vati

zed

firm

s(2

6co

untr

ies,

1990

to2011)

on

aw

ide

set

of

payou

td

eter

min

ants

.T

he

regre

ssio

ns

are

per

form

edacc

ord

ing

todiff

eren

tca

tegori

zati

on

sof

pri

vati

zati

on

:co

ntr

ol

an

dre

ven

ue

pri

vati

zati

on

s,co

mp

etit

ive

an

dn

on

-com

pet

itiv

ese

ctors

,an

dem

ergin

gan

dd

evel

op

edm

ark

ets.

Th

ese

cate

gori

zati

on

sare

as

det

ailed

inta

ble

2.

Th

evalu

esin

the

Coeff

.co

lum

nco

rres

pon

dto

the

regre

ssio

nco

effici

ents

of

each

exp

lan

ato

ryvari

ab

lean

dP

-Val.

corr

esp

on

ds

toth

ele

vel

of

sign

ifica

nce

of

the

Z-v

alu

eca

lcu

late

du

sin

gro

bu

stst

an

dard

erro

rsat

the

firm

-lev

el.

Th

eM

od

els

can

be

des

crib

edas

per

tab

le6.

To

red

uce

the

end

ogen

eity

pro

ble

mth

ein

dep

end

ent

vari

ab

les,

exce

pt

for

the

tim

ein

vari

ant

du

mm

ies

(CO

M&

PV

T)

an

dth

eY

EA

Rvari

ab

les,

are

lagged

by

on

eyea

r.In

dep

end

ent

vari

ab

les

succ

eed

edby

‘*P

VT

’re

fer

toth

ein

tera

ctio

nb

etw

een

firm

-sp

ecifi

cch

ara

cter

isti

csan

dth

eP

VT

du

mm

y.W

eu

seth

en

atu

ral

logari

thm

of

the

firm

-sp

ecifi

cp

roxy

vari

ab

les

den

ote

dby

‘Ln

’.W

eco

ntr

ol

for

the

firm

-lev

elin

du

stry

fixed

effec

tsan

dyea

rfi

xed

effec

tsin

the

fou

rre

gre

ssio

nm

od

els.

Ob

serv

ati

on

isth

enu

mb

erof

firm

-yea

rob

serv

ati

on

s.F

irm

sis

the

nu

mb

erof

firm

sfo

rw

hic

hob

serv

ati

on

sw

ere

availab

le.

R2

over

all

isth

eover

all

R-s

qu

are

dst

ati

stic

.F

or

ad

efin

itio

nof

the

pro

xy

vari

ab

les

ple

ase

refe

rto

Ap

pen

dix

1.

Pan

elA

Pan

elA

1:

Contr

ol

pri

vati

zati

on

Pan

elA

2:

Rev

enu

ep

rivati

zati

on

Model

IM

od

elII

Mod

elII

IM

od

elIV

Mod

elI

Mod

elII

Mod

elII

IM

od

elIV

Vari

ab

les

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

PV

T1.0

64

0.0

00

0.6

01

0.0

19

0.5

60

0.0

37

0.7

31

0.0

02

1.7

82

0.0

00

0.6

15

0.0

00

0.4

46

0.0

13

0.6

23

0.0

01

SIZ

E*

PV

T0.0

00

0.9

30

-0.0

04

0.2

50

0.0

05

0.0

87

0.0

00

0.8

91

ER

*P

VT

0.0

08

0.0

77

0.0

05

0.2

16

0.0

06

0.1

18

0.0

04

0.3

33

RE

TE

*P

VT

0.0

00

0.8

81

0.0

00

0.6

32

0.0

00

0.4

95

0.0

00

0.5

47

CA

SH

*P

VT

0.0

03

0.1

84

0.0

02

0.3

82

0.0

01

0.6

03

0.0

00

0.9

40

CL

OS

E*

PV

T-0

.002

0.2

13

-0.0

03

0.0

53

-0.0

03

0.0

79

-0.0

04

0.0

91

NI

Ris

k*

PV

T0.0

30

0.5

96

0.0

21

0.6

84

0.0

39

0.4

92

0.0

34

0.5

30

GT

A*

PV

T-0

.002

0.0

77

-0.0

02

0.0

67

-0.0

01

0.4

54

-0.0

01

0.2

75

MT

BV

*P

VT

0.0

36

0.0

85

0.0

27

0.1

17

0.0

15

0.4

38

0.0

37

0.0

21

GS

ale

s*

PV

T0.0

01

0.1

19

0.0

01

0.1

19

0.0

02

0.0

26

0.0

02

0.0

66

LR

*P

VT

0.0

03

0.4

23

0.0

03

0.4

25

-0.0

02

0.5

68

-0.0

04

0.3

11

ER

F*

PV

T-0

.013

0.7

38

-0.0

17

0.6

67

0.0

32

0.3

81

0.0

13

0.7

63

Ln

Sale

sE

mp

*P

VT

-0.0

07

0.7

70

-0.0

02

0.9

32

0.0

03

0.9

16

-0.0

13

0.6

17

Ln

EM

P*

PV

T0.0

02

0.9

62

0.0

34

0.4

32

-0.0

27

0.4

74

0.0

44

0.3

01

CO

M*

PV

T-0

.042

0.7

47

-0.1

54

0.3

19

-0.1

20

0.3

77

-0.1

58

0.2

99

DT

P*

PV

T-0

.527

0.1

20

-0.3

42

0.2

27

Ob

serv

ati

on

81299

45659

45659

37939

82258

46308

46308

38443

Fir

ms

6519

5838

5838

4550

6575

5893

5893

4592

R2

over

all

0.0

45

0.6

36

0.6

36

0.6

66

0.0

64

0.6

42

0.6

44

0.6

71

39

Tab

le7

contd

.

Panel

B

Panel

B1:

Com

peti

tive

pri

vati

zati

on

Panel

B2:

Non-c

om

peti

tive

pri

vati

zati

on

Model

IM

odel

IIM

odel

III

Model

IVM

odel

IM

odel

IIM

odel

III

Model

IVV

ari

able

sC

oeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

PV

T0.6

55

0.0

00

0.1

61

0.0

19

0.3

82

0.7

04

0.4

63

0.6

06

0.9

17

0.0

00

0.4

96

0.0

04

4.4

20

0.0

16

5.8

59

0.0

03

SIZ

E*

PV

T-0

.001

0.8

63

-0.0

02

0.6

43

0.0

21

0.0

20

0.0

20

0.1

58

ER

*P

VT

0.0

07

0.1

01

0.0

05

0.2

05

0.0

13

0.4

80

0.0

45

0.1

17

RE

TE

*P

VT

0.0

01

0.2

64

0.0

00

0.4

54

0.0

05

0.0

01

-0.0

04

0.1

31

CA

SH

*P

VT

0.0

03

0.1

96

0.0

01

0.6

95

-0.0

01

0.7

56

0.0

00

0.9

88

CL

OSE

*P

VT

-0.0

05

0.0

24

-0.0

05

0.0

19

0.0

02

0.5

88

0.0

03

0.5

31

NI

Ris

k*

PV

T0.0

42

0.4

93

0.0

20

0.7

18

0.4

70

0.6

00

2.3

37

0.1

03

GT

A*

PV

T-0

.001

0.5

87

-0.0

01

0.3

05

-0.0

01

0.7

37

-0.0

02

0.4

21

MT

BV

*P

VT

0.0

23

0.2

64

0.0

32

0.0

48

0.0

92

0.1

05

0.0

38

0.4

03

GSale

s*

PV

T0.0

02

0.0

32

0.0

02

0.0

13

0.0

00

0.8

62

0.0

00

0.9

87

LR

*P

VT

-0.0

06

0.1

10

-0.0

06

0.1

30

0.0

06

0.2

85

0.0

12

0.0

13

ER

F*

PV

T0.0

12

0.7

70

0.0

05

0.9

10

0.0

90

0.0

55

0.0

69

0.0

60

Ln

Sale

sE

mp

*P

VT

0.0

19

0.7

69

-0.0

27

0.6

23

0.2

23

0.1

03

0.2

32

0.1

03

Ln

EM

P*

PV

T0.0

73

0.2

11

0.0

60

0.2

90

-0.0

23

0.8

08

0.0

84

0.4

52

CO

M*

PV

T-0

.248

0.0

90

-0.3

92

0.0

15

0.4

16

0.1

05

0.2

75

0.3

73

DT

P*

PV

T-0

.273

0.3

59

-0.0

69

0.8

88

Obse

rvati

on

81620

45975

45975

38269

78190

43913

43913

36328

Fir

ms

6529

5850

5850

4569

6266

5612

5612

4356

R2

overa

ll0.0

46

0.6

37

0.6

38

0.6

67

0.0

52

0.6

42

0.6

44

0.6

71

Panel

C

Panel

C1:

Em

erg

ing

countr

ies

Panel

C2:

Develo

ped

countr

ies

Model

IM

odel

IIM

odel

III

Model

IVM

odel

IM

odel

IIM

odel

III

Model

IVV

ari

able

sC

oeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

PV

T0.6

51

0.0

00

0.0

67

0.0

02

-5.9

31

0.6

55

1.0

47

0.8

61

0.7

25

0.0

00

0.2

77

0.0

00

0.5

87

0.5

14

0.3

51

0.6

94

SIZ

E*

PV

T-0

.004

0.5

61

0.0

01

0.9

69

0.0

03

0.4

65

0.0

01

0.8

09

ER

*P

VT

0.0

20

0.1

18

-0.0

04

0.8

44

0.0

05

0.2

01

0.0

06

0.1

29

RE

TE

*P

VT

0.0

06

0.0

16

0.0

00

0.8

98

0.0

00

0.6

43

0.0

00

0.6

89

CA

SH

*P

VT

0.0

09

0.0

18

0.0

23

0.0

21

0.0

00

0.9

38

0.0

01

0.7

68

CL

OSE

*P

VT

0.0

04

0.2

31

0.0

08

0.2

42

-0.0

05

0.0

22

-0.0

05

0.0

28

NI

Ris

k*

PV

T-0

.632

0.5

18

-9.0

68

0.0

10

0.0

34

0.5

59

0.0

32

0.5

72

GT

A*

PV

T0.0

03

0.2

61

-0.0

08

0.3

14

-0.0

01

0.1

47

-0.0

01

0.2

39

MT

BV

*P

VT

0.0

31

0.5

58

-0.0

59

0.4

35

0.0

33

0.0

46

0.0

32

0.0

51

GSale

s*

PV

T-0

.002

0.3

66

0.0

08

0.4

07

0.0

02

0.0

13

0.0

02

0.0

24

LR

*P

VT

-0.0

11

0.1

41

-0.0

19

0.0

03

-0.0

02

0.5

73

-0.0

03

0.4

45

ER

F*

PV

T-0

.053

0.3

30

0.1

67

0.1

37

0.0

51

0.2

42

0.0

28

0.5

29

Ln

Sale

sE

mp

*P

VT

0.4

29

0.0

01

-0.0

87

0.8

19

-0.0

46

0.4

26

-0.0

22

0.6

97

Ln

EM

P*

PV

T0.0

76

0.4

45

-0.1

88

0.5

80

0.0

36

0.5

29

0.0

43

0.4

44

CO

M*

PV

T-0

.826

0.0

01

N/A

-0.3

79

0.0

09

-0.4

32

0.0

07

DT

P*

PV

T-0

.769

0.4

75

-0.2

99

0.2

95

Obse

rvati

on

78742

44040

44040

36126

81068

45848

45848

38471

Fir

ms

6317

5650

5650

4340

6478

5812

5812

4585

R2

overa

ll0.0

44

0.6

33

0.6

35

0.6

64

0.0

54

0.6

45

0.6

46

0.6

73

40

Apppendix 1This table presents a description of the firm characteristics and non-firm specific contextual factorsused in the study.

Variables Definition

Privatized A dummy variable, which indicates whether a company is privatized;(PVT) PVT=1 otherwise zero. Privatization is defined as a government or

government controlled entity which sells shares or assets to anon-government entity (Worldscope). Privatization includes both indirectand direct sales of up to a 100% stake to an identifiable buyer andfloatation of stock on a stock exchange.

Non-privatized Firms that have not been and are not controlled by the state.

PayoutCash Dividends The total real (1990 prices) amount of common cash dividend distributed(DIV) by the firm, in millions of US$. DIV EBIAT and DIV NI is cash dividend

(DIV) scaled by earnings before interest but after tax (EBIAT) and netincome (NI), respectively.

SizeMarket Value The total real (1990 prices) amount of market value (capitalization)(MV) of the firm, in millions of US$.

Size of Firm The country-specific market value percentile ranking of a firm on an(SIZE) annual basis.

ProfitabilityEarnings Ratio The firm earnings before interest but after tax (EBIAT) as a percentage(ER) of total assets.

EBIAT The total real (1990 prices) earnings before interest but after tax inmillions of US$.

Net Income (NI) The total real (1990 prices) net income of the firm in millions of US$.

LiquidityRetained Earnings The retained earnings as a percentage of the market value of firm equity.(RETE)

Cash Holding The sum of cash and short term investments as a percentage of total(CASH) assets of the firm.

OwnershipClose The number of shares held by insiders (shareholders who hold 5% or more(CLOSE) of the outstanding shares, such as officers, directors or their immediate

family members, other corporations or individuals) as a percentage of thetotal number of outstanding common shares.

41

Appendix 1 contd.

Variables Definition

RiskIncome Risk The standard deviation of net income as a fraction of total assets over(NI Risk) the most recent three years including the current fiscal year.

GrowthTotal Assets The relative (percentage) change of the total assets in real (1990 prices)Growth (G TA) millions of US$. G TAt = ln(TAt/TAt−1), where ln is natural

logarithm.

MTBV The market value of equity divided by the book value of the equity.

Sales Growth The relative (percentage) change of the total sales in real (1990 prices)(G Sales) millions of US$. G Salest = ln(Salest/Salest−1), where ln is

natural logarithm.

LeverageLeverage Ratio The sum of short-term and long-term debt as a percentage of the total(LR) assets of the firm.

ReportingEarning Reporting The frequency at which earnings are reported per annum. (1 to 4 times).Frequency (ERF) 1 = Annual, 2 = Biannual and 4 = Quarterly Reporting.

EfficiencySales to employees The total real (1990 prices) sales of the firm in millions of US$ as a fractionratio (Sales Emp) of the total number of employees working in a firm.

Employees The total number of both full-time and part-time employees working in(Emp) a firm.

InterceptConstant The intercept of the regression equation.

Non-firm specific contextual factorsCommon Law A dummy variable, which indicates whether a company originates from a(COM) common law country; COM = 1, otherwise zero.

Dividend Tax Dividend tax penalty is attributable to Poterba and Summers (1984) and

Penalty (DTP) defined as δDiv =τDiv−α

1−α −τCG

1−τCG , where τDiv is the dividend tax rate,

τCG is the capital gains tax rate and α is the imputation rate (α variesfrom 0% to 33%). DTP is calculated in all countries except Argentina,Brazil, Chile, China, India, Malaysia, Peru, Russia and Turkey due todata availability limitations.

YEAR Year of observation of the firm-level characteristics in the regressionanalysis, from 1990 to 2011.

42

Appendix 2This table presents a description of the sample of privatized firms and their average cash dividend pay out(in millions of 1990 real US$), 1990 to 2011. Firms refers to the number of privatized firms. Dividendrefers to the average value of DIV. All the DIV observations have been converted from local currency toUS$ by using the year-end conversion rate. Panel A gives the country by country DIV. Panel B givesthe DIV based on control versus revenue privatizations. Panel C gives the DIV based on the nature of theindustry, a competitive versus uncompetitive industry. Panel D gives the DIV based on the level of economicdevelopment of the country where the firm is incorporated. Panel E reports the industry breakdown of theDIV. All panels except panel B contain observations on 409 firms. Panel B is limited to 214 firms due to apaucity of data in the change in shareholdings pre- and post-privatization.

Countries Firms Dividend Category Firms Dividend

Panel A: Country by country Panel B: By level of privatization

Argentina 6 190.08 Control 71 107.38Australia 6 27.09 Revenue 143 298.12Austria 7 12.99Brazil 28 238.08Canada 57 25.78Chile 5 63.81 Panel C: By nature of industry

China 5 39.48Germany 28 291.80 Competitive 336 128.02Spain 14 349.09 Non - competitive 73 213.32Finland 9 111.39France 41 222.16UK 59 45.69Greece 6 154.69 Panel D: By level of development

India 3 50.38Italy 19 489.63 Emerging 124 113.88Mexico 3 256.26 Developed 285 155.42Malaysia 4 56.37Netherlands 6 209.87Norway 4 28.00 Panel E: Sector by sector

New Zealand 6 14.69Peru 10 30.50 Telecommunications 32 296.94Poland 20 44.83 Manufacturing 147 108.64Portugal 7 24.04 Financial 6 51.83Russia 31 92.74 Transportation 32 86.32Sweden 16 28.19 Utilities 67 235.65Turkey 9 50.49 Other 125 95.28

43

Appendix 3This table presents results for the random effects panel regressions for the (natural log of the) real amountspaid as cash dividends, DIV, by one-to-one matched sample of privatized and non-privatized firms (26countries, 1990 to 2011) on a wide set of payout determinants. The matched sample of firms is a monotonicone-to-one relation for the same firm-year of observation on the following criteria: country of origin, firm size(+/- 10%), cash holdings (+/- 5%), and growth in total assets. The values in the Coeff. column correspondto the regression coefficients of each explanatory variable and P-Val. corresponds to the level of significanceof the Z-value calculated using robust standard errors at the firm-level. In Model I, only the privatizationdummy, PVT is used as an explanatory variable. In Model II, the full set of determinants are included. InModel III, interaction variables with the privatization dummy variable, PVT, are also included. In ModelIV, the latter model is extended to include a dividend tax penalty variable (Poterba and Summers, 1984)and this reduces sample size due to the exclusion of firms in certain countries detailed in Appendix 1. Toreduce the endogeneity problem the independent variables, except for the time invariant dummies (COM &PVT) and the YEAR variables, are lagged by one year. Independent variables succeeded by ‘* PVT’ referto the interaction between firm-specific characteristics and the PVT dummy. Hence, we adopt a parametricdummy variable difference-in-differences procedure. We use the natural logarithm of the firm-specific proxyvariables denoted by ‘Ln ’. We control for the firm-level industry fixed effects and year fixed effects in thefour regression models. Observation is the number of firm-year observations. Firms is the number of firmsfor which observations were available. R2 overall is the overall R-squared statistic. For a definition of theproxy variables please refer to Appendix 1.

Model I Model II Model III Model IVVariables Coeff. P-Val. Coeff. P-Val. Coeff. P-Val. Coeff. P-Val.

SIZE 0.036 0.000 0.038 0.000 0.038 0.000ER 0.016 0.000 0.014 0.001 0.011 0.008RETE 0.000 0.501 0.001 0.153 0.001 0.389CASH 0.004 0.010 0.005 0.023 0.003 0.195CLOSE -0.006 0.000 -0.005 0.060 -0.005 0.052NI Risk 0.106 0.139 0.057 0.561 0.055 0.586G TA -0.001 0.161 -0.001 0.270 -0.001 0.207MTBV -0.002 0.895 -0.006 0.726 -0.002 0.899G Sales 0.000 0.515 0.000 0.585 0.000 0.875LR -0.008 0.003 -0.004 0.245 -0.005 0.168ERF -0.007 0.772 -0.029 0.370 -0.051 0.176Ln Sales Emp 0.132 0.032 0.106 0.180 0.067 0.385Ln EMP 0.265 0.000 0.212 0.001 0.226 0.000COM 0.107 0.279 0.125 0.351 -0.142 0.376YEAR 0.035 0.000 0.035 0.000 0.038 0.000DTP -0.536 0.060PVT 0.472 0.006 0.267 0.059 1.091 0.491 1.050 0.484SIZE * PVT -0.004 0.392 -0.005 0.297ER * PVT 0.005 0.032 0.004 0.064RETE * PVT -0.001 0.321 -0.001 0.373CASH * PVT -0.002 0.527 -0.001 0.791CLOSE * PVT -0.002 0.462 -0.002 0.578NI Risk * PVT 0.132 0.237 0.108 0.342G TA * PVT 0.000 0.958 -0.001 0.704MTBV * PVT 0.010 0.702 0.015 0.543G Sales * PVT 0.002 0.144 0.002 0.144LR * PVT -0.008 0.112 -0.006 0.240ERF * PVT 0.050 0.042 0.064 0.025Ln Sales Emp * PVT 0.050 0.064 0.022 0.088Ln EMP * PVT 0.119 0.158 0.136 0.101COM * PVT -0.010 0.057 -0.146 0.070DTP * PVT 0.094 0.814Constant 1.776 0.000 -74.571 0.000 -73.620 0.000 -77.666 0.000

Observation 9324 5543 5543 4810Firms 666 610 610 495R2 overall 0.084 0.662 0.662 0.709Year fixed effects Yes Yes Yes YesInd. fixed effects Yes Yes Yes Yes

44

Ap

pen

dix

4T

his

tab

lep

rese

nts

resu

lts

for

the

ran

dom

effec

tsp

an

elre

gre

ssio

ns

for

the

(natu

ral

log

of

the)

real

am

ou

nts

paid

as

cash

div

iden

ds,

DIV

,by

on

eto

on

em

atc

hed

sam

ple

of

pri

vati

zed

an

dn

on

-pri

vati

zed

firm

s(2

6co

untr

ies,

1990

to2011)

on

aw

ide

set

of

payou

td

eter

min

ants

.T

he

matc

hed

sam

ple

of

firm

sis

am

on

oto

nic

on

e-to

-on

ere

lati

on

for

the

sam

efi

rm-y

ear

of

ob

serv

ati

on

on

the

foll

ow

ing

crit

eria

:co

untr

yof

ori

gin

,fi

rmsi

ze(+

/-

10%

),ca

shh

old

ings

(+/-

5%

),an

dgro

wth

into

tal

ass

ets.

Th

ere

gre

ssio

ns

are

per

form

edacc

ord

ing

tod

iffer

ent

cate

gori

zati

on

sof

pri

vati

zati

on

:co

ntr

ol

an

dre

ven

ue

pri

vati

zati

on

s,co

mp

etit

ive

an

dn

on

-com

pet

itiv

ese

ctors

an

dem

ergin

gand

dev

elop

edm

ark

ets.

Th

ese

cate

gori

zati

on

sare

as

det

ailed

inta

ble

2.

Th

evalu

esin

the

Coeff

.co

lum

nco

rres

pon

dto

the

regre

ssio

nco

effici

ents

of

each

exp

lan

ato

ryvari

ab

lean

dP

-Val.

corr

esp

on

ds

toth

ele

vel

of

sign

ifica

nce

of

the

Z-v

alu

eca

lcu

late

du

sin

gro

bu

stst

an

dard

erro

rsat

the

firm

-lev

el.

Th

eM

od

els

can

be

des

crib

edas

per

tab

le6.

To

red

uce

the

endogen

eity

pro

ble

mth

ein

dep

end

ent

vari

ab

les,

exce

pt

for

the

tim

ein

vari

ant

du

mm

ies

(CO

M&

PV

T)

an

dth

eY

EA

Rvari

ab

les,

are

lagged

by

on

eyea

r.In

dep

end

ent

vari

ab

les

succ

eed

edby

‘*P

VT

’re

fer

toth

ein

tera

ctio

nb

etw

een

firm

-sp

ecifi

cch

ara

cter

isti

csan

dth

eP

VT

du

mm

y.W

eu

seth

en

atu

ral

logari

thm

of

the

firm

-sp

ecifi

cp

roxy

vari

ab

les

den

ote

dby

‘Ln

’.W

eco

ntr

ol

for

the

firm

-lev

elin

du

stry

fixed

effec

tsan

dyea

rfi

xed

effec

tsin

the

fou

rre

gre

ssio

nm

od

els.

Ob

serv

ati

on

isth

enu

mb

erof

firm

-yea

rob

serv

ati

on

s.F

irm

sis

the

nu

mb

erof

firm

sfo

rw

hic

hob

serv

ati

on

sw

ere

availab

le.

R2

over

all

isth

eover

all

R-s

qu

are

dst

ati

stic

.F

or

ad

efin

itio

nof

the

pro

xy

vari

ab

les

ple

ase

refe

rto

Ap

pen

dix

1.

Pan

elA

Pan

elA

1:

Contr

ol

pri

vati

zati

on

Pan

elA

2:

Rev

enu

ep

rivati

zati

on

Model

IM

od

elII

Mod

elII

IM

od

elIV

Mod

elI

Mod

elII

Mod

elII

IM

od

elIV

Vari

ab

les

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

PV

T0.6

04

0.0

13

0.3

81

0.0

21

0.5

14

0.0

12

0.7

99

0.0

01

1.4

25

0.0

00

0.4

64

0.0

10

0.5

23

0.0

10

0.6

03

0.0

03

SIZ

E*

PV

T-0

.008

0.4

01

-0.0

08

0.5

10

-0.0

03

0.4

98

-0.0

05

0.2

36

ER

*P

VT

0.0

05

0.0

62

0.0

04

0.0

51

0.0

04

0.5

29

0.0

03

0.6

58

RE

TE

*P

VT

-0.0

01

0.0

86

-0.0

01

0.1

24

-0.0

01

0.3

39

-0.0

01

0.4

83

CA

SH

*P

VT

-0.0

01

0.6

79

0.0

00

0.9

97

-0.0

04

0.2

34

-0.0

03

0.3

87

CL

OS

E*

PV

T-0

.001

0.6

98

-0.0

02

0.5

70

-0.0

02

0.4

58

-0.0

02

0.5

64

NI

Ris

k*

PV

T0.0

95

0.3

75

0.0

59

0.5

92

0.1

09

0.3

36

0.0

86

0.4

69

GT

A*

PV

T-0

.001

0.3

56

-0.0

01

0.3

26

0.0

00

0.8

61

0.0

00

0.8

17

MT

BV

*P

VT

0.0

27

0.2

94

0.0

15

0.5

56

0.0

02

0.9

33

0.0

21

0.3

77

GS

ale

s*

PV

T0.0

02

0.2

34

0.0

02

0.2

25

0.0

02

0.0

92

0.0

02

0.0

83

LR

*P

VT

-0.0

03

0.6

10

0.0

00

0.9

75

-0.0

07

0.1

75

-0.0

06

0.2

40

ER

F*

PV

T-0

.006

0.9

16

0.0

20

0.7

21

0.0

53

0.3

16

0.0

53

0.3

74

Ln

Sale

sE

mp

*P

VT

0.0

20

0.0

52

0.0

26

0.0

41

0.0

13

0.0

89

0.0

45

0.0

85

Ln

EM

P*

PV

T-0

.085

0.0

35

-0.0

75

0.0

79

-0.0

54

0.0

22

-0.0

95

0.0

92

CO

M*

PV

T0.1

04

0.5

88

0.1

48

0.5

14

0.0

45

0.8

20

0.2

10

0.3

57

DT

P*

PV

T-0

.215

0.6

27

0.0

08

0.9

85

Ob

serv

ati

on

8181

4798

4798

4204

9063

5383

5383

4682

Fir

ms

595

543

543

445

646

592

592

483

Wald

668

1990

2132

2454

825

2526

2773

3101

Pro

bab

ilit

y0.0

00

0.0

00

0.0

00

0.0

00

0.0

00

0.0

00

0.0

00

0.0

00

R2

over

all

0.0

92

0.6

52

0.6

52

0.7

00

0.1

33

0.6

67

0.6

68

0.7

13

45

Ap

pen

dix

4co

ntd

.

Panel

B

Panel

B1:

Com

peti

tive

pri

vati

zati

on

Panel

B2:

Non-c

om

peti

tive

pri

vati

zati

on

Model

IM

odel

IIM

odel

III

Model

IVM

odel

IM

odel

IIM

odel

III

Model

IVV

ari

able

sC

oeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

PV

T0.0

50

0.0

73

0.0

44

0.0

96

-1.0

30

0.5

27

-0.7

85

0.6

08

0.2

47

0.5

69

0.4

24

0.1

48

3.9

65

0.0

43

5.9

87

0.0

08

SIZ

E*

PV

T-0

.009

0.0

66

-0.0

08

0.1

10

0.0

18

0.0

77

0.0

19

0.0

18

ER

*P

VT

0.0

04

0.5

56

0.0

03

0.5

84

0.0

01

0.9

51

0.0

38

0.2

37

RE

TE

*P

VT

-0.0

01

0.5

43

-0.0

01

0.5

40

0.0

06

0.0

01

0.0

06

0.0

87

CA

SH

*P

VT

-0.0

01

0.6

98

-0.0

01

0.7

35

-0.0

07

0.1

72

-0.0

01

0.9

02

CL

OSE

*P

VT

-0.0

03

0.2

79

-0.0

03

0.3

80

0.0

03

0.5

02

0.0

07

0.1

89

NI

Ris

k*

PV

T0.1

17

0.3

01

0.0

85

0.4

58

0.0

65

0.9

45

1.4

71

0.2

88

GT

A*

PV

T0.0

00

0.7

97

0.0

00

0.9

55

0.0

00

0.9

77

-0.0

02

0.4

07

MT

BV

*P

VT

0.0

10

0.7

11

0.0

17

0.5

10

0.1

16

0.0

96

0.0

52

0.4

40

GSale

s*

PV

T0.0

02

0.0

99

0.0

02

0.0

94

0.0

01

0.8

05

0.0

01

0.6

47

LR

*P

VT

-0.0

12

0.0

27

-0.0

09

0.1

00

0.0

04

0.6

08

0.0

09

0.1

59

ER

F*

PV

T0.0

22

0.7

02

0.0

48

0.4

48

0.1

27

0.0

57

0.1

18

0.0

33

Ln

Sale

sE

mp

*P

VT

0.0

47

0.6

59

0.0

25

0.8

01

0.1

63

0.2

47

0.1

66

0.2

89

Ln

EM

P*

PV

T0.1

73

0.0

45

0.1

44

0.0

93

0.0

51

0.6

79

0.1

81

0.1

48

CO

M*

PV

T-0

.003

0.9

88

0.0

39

0.8

63

-0.5

22

0.1

44

-0.6

94

0.0

51

DT

P*

PV

T0.0

05

0.9

90

0.3

88

0.4

33

Obse

rvati

on

8579

5140

5140

4543

5529

3227

3227

2731

Fir

ms

610

559

559

464

378

348

348

273

5R

2w

ithin

0.0

00

0.2

34

0.2

41

0.2

56

0.0

00

0.2

63

0.2

72

0.2

82

R2

overa

ll0.0

54

0.6

53

0.6

53

0.6

94

0.1

15

0.6

84

0.6

96

0.7

46

Panel

C

Panel

C1:

Em

erg

ing

countr

ies

Panel

C2:

Develo

ped

countr

ies

Model

IM

odel

IIM

odel

III

Model

IVM

odel

IM

odel

IIM

odel

III

Model

IVV

ari

able

sC

oeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

Coeff

.P

-Val.

PV

T0.3

52

0.0

03

0.0

75

0.0

76

4.4

93

0.0

95

6.1

85

0.0

40

0.1

49

0.0

31

0.1

63

0.0

66

-0.2

73

0.8

56

-0.9

06

0.5

43

SIZ

E*

PV

T-0

.011

0.2

11

0.0

32

0.1

30

-0.0

05

0.3

28

-0.0

06

0.2

69

ER

*P

VT

0.0

31

0.0

74

-0.0

37

0.0

19

0.0

01

0.8

14

0.0

04

0.4

66

RE

TE

*P

VT

0.0

05

0.0

97

0.0

09

0.0

50

-0.0

01

0.2

66

-0.0

01

0.3

89

CA

SH

*P

VT

0.0

03

0.6

49

0.0

15

0.1

68

-0.0

03

0.3

49

-0.0

01

0.7

07

CL

OSE

*P

VT

0.0

05

0.3

68

0.0

10

0.3

28

-0.0

03

0.4

25

-0.0

02

0.5

42

NI

Ris

k*

PV

T-0

.041

0.9

71

-8.4

01

0.1

38

0.1

10

0.3

22

0.1

08

0.3

43

GT

A*

PV

T0.0

05

0.2

22

-0.0

12

0.0

84

-0.0

01

0.7

04

0.0

00

0.8

01

MT

BV

*P

VT

0.0

17

0.7

84

-0.2

77

0.0

20

0.0

20

0.3

70

0.0

19

0.4

52

GSale

s*

PV

T-0

.002

0.4

98

0.0

15

0.0

16

0.0

02

0.0

73

0.0

02

0.0

52

LR

*P

VT

-0.0

16

0.1

10

-0.0

35

0.0

01

-0.0

07

0.2

09

-0.0

06

0.3

02

ER

F*

PV

T-0

.052

0.4

94

0.1

47

0.1

99

0.0

62

0.2

69

0.0

73

0.2

23

Ln

Sale

sE

mp

*P

VT

0.3

59

0.0

51

0.6

96

0.1

00

0.0

21

0.8

28

0.0

18

0.8

53

Ln

EM

P*

PV

T0.0

44

0.7

60

-0.8

75

0.0

01

-0.1

50

0.0

70

-0.1

38

0.0

97

CO

M*

PV

T-0

.859

0.0

51

N/A

-0.1

59

0.4

18

-0.0

18

0.9

35

DT

P*

PV

T0.1

13

0.9

75

0.0

27

0.9

45

Obse

rvati

on

5777

3266

3266

2533

8331

5101

5101

4741

Fir

ms

407

370

370

255

581

537

537

482

R2

overa

ll0.0

57

0.6

29

0.6

39

0.7

18

0.0

95

0.6

89

0.6

89

0.7

14

46

Date post:	01-Jan-2017
Category:	Documents
Upload:	dongoc
View:	223 times
Download:	1 times

Whence the privatized firm dividend premium?

Documents