The Financial Impact of the French Government's Nationalization/Privatization Strategy

Abstract

In 1982, the newly elected French government initiated an unprecedented move by undertaking a massive nationalization plan. This plan involved firms which, at the time, played a crucial role in the French economy. The government's move was short-lived, however, as a program leading to the privatization of some of the firms that had been nationalized in 1982 was initiated in 1986. This paper investigates the value that was created (destroyed) during the nationalization period for each of the French firms nationalized in 1982 and re-privatized between 1986 and 1997. This paper also investigates the extent to which the French citizens registered a gain or a loss as a consequence of the government's nationalization/privatization strategy. Our results show that the French government did not destroy value through the nationalization process. They also show that the French government, and thereby the French citizens, did not register any gain from the nationalization process because of the magnitude of both the premiums paid to shareholders of nationalized firms and the underpricing of shares at the time of privatization.