Divestment of state capital and stock price reaction: evidence from an emerging economy

This study assesses the short-run impact of divesting state capital on the stock price fluctuations of listed and privatised state-owned enterprises in Vietnam's emerging economy. Deploying event study and ordinary least squares regression models on a day-end database of listed state-owned enterprises' (SOEs) market prices during the period from 2017 to 2022, our research findings indicate that divestment of state capital significantly impacts businesses in the short run, which is reflected in abnormal and positive changes in the stock prices around the divestment announcement dates. Interestingly, our findings also reveal that this impact alters according to the characteristics of the business, including firm size, the size of the divestment deal, and the remaining portion of state capital at the business. These findings shape our recommendations for investors when making investment decisions based on the divestment plans of the state.