TITLE:
Market Efficiency during the Mexican Banks’ Privatization Announcement
AUTHORS:
Roberto J. Santillán-Salgado
KEYWORDS:
Privatization of State Owned Enterprises, Capital Market Efficiency in Emerging Markets, Mexico’s Banks Privatization
JOURNAL NAME:
Modern Economy,
Vol.6 No.1,
January
23,
2015
ABSTRACT: During the last years of
the decade of the 1980s, the Mexican government reduced its participation as an
owner of productive facilities. After privatizing the national railway system,
airlines, mining companies, etc., in 1990 it was time to fully privatize the
banking industry. Banks had been expropriated eight years before, in September,
1982. However, between 1987 and 1990, fifteen state-owned banks had issued
small amounts of stock to the market. So, on May 2nd of 1990, when President
Carlos Salinas publicly announced that all government owned banks would soon be
fully privatized, several commercial banks were already partially publicly
traded. In retrospective, the full-privatization announcement represents a
privileged opportunity to test the efficiency of the Mexican stock market at
that time. Using Event Study Methodology, this work analyzes how significant
was the response of the publicly traded banks’ stock price to the full
privatization announcement, and quantifies its wealth-creation effects.