Privatisation and the development of local capital markets

Abstract

Privatisation is the response of government to failures in state ownership. Privatisation has developed into an economic policy tool used by many national governments. The objective of this study is to assess the impact of privatisation on the development of local capital market especially the equity market. During the labour governance in the 1970s there was a change in the role of the state from passive to active. The government achieved this mainly by two main steps; creating state-owned enterprises and nationalising existing private enterprises. After the 1987 election, when a nationalist government was elected, the focus shifted to privatisation. Capital market development will promote economic growth. To analyse the impact of privatisation on the development of Maltese capital market, privatisation proceeds, banking based finance and the capitalisation and liquidity of the stock market were analysed. Based on these results it may be claimed that government did not reach its objective of developing the capital market through privatisation.