The privatization procedure is an important factor of economic adjustment programmes being adopted by a large number of governments internationally. Privatization is defined as the total or partial outlet of public enterprises from the government control. The transfer of control has reference to the transfer of the share capital, the right to appoint the majority of the members of the Board of Directors, or finally the transfer of the management of the enterprise.
The British government of Thatcher the first to introduce privatization in the early 1980’s, having to deal with a cautious investment community. For more than two decades, developed and developing economies participate in a variety of privatization programmes and today privatization constitutes a useful tool for the governments internationally in order to improve the operational efficiency of the state owned enterprises and/or to raise capital from the private sector to the benefit of the government budget.
This paper examines a sample of 18 public enterprises that have participated in the Greek privatization programme, via share offerings in the Athens Stock Exchange. Our objective is twofold. First, we examine if the prices of the privatized enterprises exhibited any specific price pattern after their listing in the Athens Stock Exchange. In this respect we may have some statistical evidence if the market considered the prices of the new issues as fair prices i.e. prices that do not exhibit a specific appreciation or depreciation pattern. Second, we examine if the Greek market operates in accordance with the predictions of informational efficiency, i.e. stock prices under examination did not exhibit a slow adjustment to new levels which would enable profitable trading.
The valuation of an enterprise and finally the pricing of its shares, constitute a sensitive and difficult matter. This issue becomes even difficult when dealing with state-owned enterprises that are privatized via listing in the stock exchange, since their shares have not been traded before and there is not a clear benchmark to assist pricing. The valuation of an enterprise is necessary in order to be determined its listing price and the value of the enterprise may be determined according to a variety of methods, where a number of alternative factors have to be fully estimated. Nevertheless, different objectives of the government are possible to affect the listing price. Thus, it is to the market participants to decide whether the listing price is fair or not by trading accordingly.
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