Equity Valuation in the Czech Voucher Privatization Auctions

Abstract

This is a study of the determinants of share pricing and demand in the path-breaking Czech voucher-based multiple-round mass privatization auction. The results presented here document that share valuation and demand in this auction were based on firm characteristics such as return on sales, sales growth, and ownership structure in the early rounds. However, such information declined in importance while auction results on share prices and trading volumes from prior rounds increased in importance as determinants of share prices and demand in later rounds. While share prices overshot or undershot in the early rounds, by round four they had stabilized and the market cleared successfully by the fifth and final round. These results are new evidence on the price discovery process in the Czech privatization auction and confirm the success of this auction in the efficient pricing and equitable distribution of enterprise shares.