AN INVESTIGATION OF THE RELATIONSHIP BETWEEN STOCK MARKET DEVELOPMENT AND THE PRIVATIZATION OF STATE-OWNED
ENTERPRISES (S0Es) IN SAUDI ARABIA: A RESEARCH PROPOSAL OVERVIEW
The introduction of the privatization of state-owned enterprises (SOEs) and the development of the stock market in Saudi Arabia are relatively new occurrences in the country. Each development holds the potential to reshape and refocus the functioning of the Saudi economy. This paper develops an overview of a research proposal for the investigation of the interrelationships between these two phenomena in Saudi Arabia.
The privatization of SOEs, in 2003, has a track record in a variety of countries that cover the gamut of economic characteristics, economic objectives, and economic resources among the developing economies. The success of the privatization programs in the various countries has not been uniform; however, few privatizing economies have reverted to the re-nationalization of SOEs. In many of the countries where the privatization of SOEs has occurred, the development of a stock market has been a concurrent activity. Again, the success of stock market development has varied across countries; however, few economies have closed stock markets once developed.
Studies of the relationship between the privatization of SOEs in a country and the success of stock market development in a country have produced mixed results. The findings of the studies generally range from positive effects on stock market development of the privatization of SOEs to negligible effects of SOE privatization on stock market development. A finding of a negative effect on stock market development of the privatization of SOEs in a country is uncommon.
The potential for the stimulus of stock market development through the privatization of SOEs depends on the character of the privatization program, the capacity of a country to support a stock market, and a variety of politica...