The effect of Norwegian state ownership: an empirical case study on the effect of the Norwegian privatization scheme on abnormal return and systematic risk
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- Master Thesis 
The purpose of this thesis is to analyse the effect of state ownership on abnormal return and systematic risk in Norwegian state-owned firms on the Oslo Stock Exchange in the period 1999- 2015. This master thesis provides important insights for both retail and institutional investors by analysing the effect of state ownership from an investor perspective. Inspired by the current political debate and earlier studies on the effect of privatization we seek to answer the following research question: “How does Norwegian state ownership affect abnormal return and systematic risk in Norwegian publicly listed firms” Using an OLS specification we find that state ownership is not significantly correlated with abnormal return. Furthermore, the OLS specification documents that state-owned firms are on average more exposed to systematic risk than private. The results demonstrate that state ownership has a neutral effect on abnormal return, and increases the systematic risk compared to private ownership. The Event Model reveals that the immediate market reaction after a state divestment is negative. The results are robust and the exogeneity of the divestments are validated using the Synthetic Control Group Method. The results indicate the market perceives the Norwegian Government to contribute with abnormal return in Statoil and Telenor. However, we do not have empirical support to conclude on a general basis that state ownership affects all firm positively. Further, the Event Model documents an increase in the systematic risk of the firm after a state divestment. The results from the General OLS Model and the Event Model suggest that state ownership leads to higher systematic risk compared to private firms and that privatization in Statoil and Telenor leads to higher systematic risk. One explanation could be that passive ownership increases the riskiness of the firm’s investment and at the same time government funds protect the firm against downside risk. As a result, the systematic risk of the firm is lower than the weighted average of its investments. The results contradict earlier studies which find that state ownership reduces efficiency and profitability. However, our results could be consistent with previous evidence as long as the Norwegian Government contributes with shareholder value which offsets the negative aspects.