Privatization and the Rise of Global Capital Markets

We examine the growth in global capital market valuation, trading volume and security issuance over the past two decades. After estimating the impact of share issue privatizations on the growth of stock markets, we find that privatizations have significantly increased market liquidity, as measured by the turnover ratio. We examine the effect privatizations have had on the pattern of share ownership by individuals and institutional investors and find that privatizations have dramatically increased the number of shareholders in many countries. However, the extremely large numbers of shareholders created by many share issue privatizations are not a stable ownership structure.