Long abstract

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During the 1990s, the rolling-back of state ownership in the economy through privatisation gathered considerable pace both in OECD countries and outside the OECD area. This process of privatisation is having an impact on economies across the globe, most notably by giving market mechanisms a greater influence over resource allocation.

Obviously, the surge in global privatisation is having a profound impact on capital markets in general, and on equity markets in particular. Indeed, one specific motive behind many privatisation programmes is to assist the development of equity markets by increasing market capitalisation and liquidity.

A closely related motive is to widen share ownership and to create a "shareholder" culture in the population at large. In a broader economic context, the existence of efficient equity markets is likely to prove important, as countries increasingly seek to address the issues of pension system reforms and of ageing populations. At the same time, by replacing public sector decision-making and control with those of the private sector, privatisation is inducing notable changes in the corporate governance structures in important segments of the economy.