TY  - JOUR
AU  - Dastidar,Siddhartha G.
AU  - Fisman,Raymond
AU  - Khanna,Tarun
TI  - Testing Limits to Policy Reversal: Evidence from Indian Privatizations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13427
PY  - 2007
Y2  - September 2007
UR  - http://www.nber.org/papers/w13427
L1  - http://www.nber.org/papers/w13427.pdf
N1  - Author contact info:
Siddhartha Dastidar
Graduate School of Business
Columbia University
2960 Broadway
New York, NY 10027-6900
E-Mail: sgd2002@columbia.edu

Raymond Fisman
School of Business
Columbia University
622 Uris Hall
3022 Broadway
New York, NY 10027
Tel: 212/854-9157
Fax: 212-316-9219
E-Mail: rf250@columbia.edu

Tarun Khanna
Harvard Business School
Morgan Hall 221
Soldiers Field
Boston, MA 02163
Tel: 617/495-6038
E-Mail: tkhanna@hbs.edu
AB  - We examine the effect of regime change on privatization using the 2004 election surprise in India. The pro-reform BJP was unexpectedly defeated by a less reformist coalition. Stock prices of government-controlled companies that had been slated for definite privatization by the BJP dropped by 3.5 percent relative to private firms. Surprisingly, government-controlled companies that were only under study for possible privatization fell by 7.5 percent relative to private firms. We interpret this as evidence of investor belief of policy irreversibility, where reforms may reach a stage beyond which future regimes have difficulty reversing those policies. Further analysis suggests that layoffs, combined with the privatization announcement, served as a credible commitment to the government's privatization agenda.
ER  -