The Vouchers Privatization Process as a Price Discovery Mechanism

Information Asymmetry, Share Mispricing and the Coordination Problem: Investor Portfolio Choice in Czech Voucher Privatization

“…Investor strategies, determinants of share demand, differences between 1 For evidence on the fear of too-dispersed ownership weakening the shareholder monitoring activity and strengthening the management see e.g. Carlin and Mayer (1992), Boycko et al (1994), Takla (1994), Kraizberg (1999).…”

“…countries and, more generally, the efficiency of the bidding process were of large concern to researchers. The main aim of governments was to sell all shares and to have all points allocated (Tříska, 2002;Hanousek and Filer, 2001;Kraizberg, 1999). This seemed to be in conflict with finding optimal share prices and motivated a number of research questions such as: Did property go to those investors who valued it most?…”

“…This holds mainly for small firms. Kraizberg (1999) showed inefficiency in price discovery, which might have a distortive impact on the allocation of resources in the economy. This argument is further strengthened by the primary aim of the government to sell all the shares and absorb all the available voucher points, which led to a mispricing bias (Hingorani et al, 1997).…”

“…This was however distorted by some inefficiencies, as Egerer (1996) pointed out, the initiative of IPFs to control the firms seemed to be determined by the size of the stake they managed to get. In addition, as Kraizberg (1999) argued, inefficiency was partially due to the very short investment horizon of cash-poor investors, who were maximizing the first official market value of funds to obtain a large proportional management fee.…”

“…Efficient investors with a longer-term horizon maximize the future expected value of the firms bidding for the most undervalued firms. The deviations from this strategy were caused by the asymmetric knowledge of investors, by different intended functions of the IPFs as Anderson (1994) proposed and distortions in price-setting (Kraizberg, 1999). We will include in our model all these factors.…”