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Political Risk and Purchases of Privatized State‐Owned Enterprises
Author(s) -
Glambosky Mina C.,
Gleason Kimberly C.,
Madura Jeff
Publication year - 2010
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2010.00275.x
Subject(s) - valuation (finance) , business , diversification (marketing strategy) , valuation effects , systematic risk , political risk , bureaucracy , finance , state owned , politics , business risks , economics , market economy , marketing , risk analysis (engineering) , political science , law
We assess the valuation effects and risk for acquirers of privatized state‐owned enterprises (SOEs). The valuation effects of purchasers are positive and significant; they increase for purchasers that have recent high performance, better access to capital, and have engaged in larger acquisitions. The acquirer valuation effects are lower when the selling government is more corrupt, more bureaucratic, and a weaker financial performer. Acquirer's total and unsystematic risk increases, indicating that purchasers of SOEs realize diversification benefits. Systematic risk increases for purchasers when the government is characterized by high political risk.