Discussion paper

DP4612 Do Retail Incentives Work in Privatizations?

20 countries around the world have used incentive packages, including bonus shares and discounts, to attract retail investors to participate in privatizations. Using a unique dataset, we estimate the total cost of incentive packages at approximately $27 billion. The expiration of bonus share plans is associated with a six-day abnormal return of -1.1% and a long-term increase in volume. Incentives have been surprisingly effective in meeting stated privatization objectives. A dollar spent on retail incentives helps to attract about 21 times as many investors as a dollar spent on underpricing. Individual-level analysis shows that flipping is not only much reduced in the short term, but also declines by at least 15% over a period of 1,000 trading days.


Keloharju, M, S Torstila and S Knüpfer (2004), ‘DP4612 Do Retail Incentives Work in Privatizations?‘, CEPR Discussion Paper No. 4612. CEPR Press, Paris & London. https://cepr.org/publications/dp4612