Management Science Letters

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1 Management Science Letters 2 (2012) Contents lists available at GrowingScience Management Science Letters homeage: Designing a comatible model of share issue rivatization for Tehran stock exchange (TSE) develoment Mohammad Aram Bonyar a*, Fatemeh Pousti b and Corynne Jaffeux c a Université Montesquieu Bordeaux IV, Paris, France b Faculty of Management Studies and Information Technology (FMIT), Jamia Hamdard University, New Delhi, India c Université Montesquieu Bordeaux IV, Paris, France A R T I C L E I N F O A B S T R A C T Article history: Received October 1, 2011 Received in Revised form December, 10, 2011 Acceted 12 December 2011 Available online 14 December 2011 Keywords: Privatization Privatization Model Share Issue Privatization Tehran Stock Exchange (TSE) Stock Market Develoment In this research, we conduct a reverse study to design a comatible model of share issue rivatization for Tehran stock exchange (TSE) develoment. Privatization and stock market develoment are known as two reresentatives of economic growth. Governments use these two economic means to achieve their develoment goals. In this study, the imact of share issue rivatization on stock market develoment is studied and an otimal model of share issue rivatization for Tehran stock exchange (TSE) develoment is introduced. To study the effect of share issue rivatization on key market develoment variables anel data of rivatization index(ipix), transaction volume, turnover velocity ratio and closing rice of each TSE listed comany are entered in co integration and error correction models (ECM) during March June The result of statistical studies shows a significant relation between rivatization index (IPIX) growth and the growth of each of Tehran stock exchange develoment roxies. Then to design a comatible model of share issue rivatization for Tehran stock market develoment, Delhi survey following Schmitt aroach during 4 hases is imlemented Growing Science Ltd. All rights reserved. 1. Introduction The Privatization as a method of reallocating assets and functions from the ublic sector to the rivate sector aears to be a factor that could lay a serious role in the quest for growth (Filiovic, 2005). Public offering of shares, or share issue rivatization (SIP), involves the sale of some or a government's entire stake in an enterrise through ublic share offering. (Dezhbakhsh, 2004). All factors influencing develoment of stock markets are outcomes of rograms, olicies and decisions made in macroeconomic and olitical levels. Privatization as a tool for economic management is executed in various methods and different levels. Directly and indirectly, rivatization efficiently hels stock market develoment and invigoration. The Article 44 of Iranian Constitution about rivatization argues sale of some of the nationalized and state-owned enterrises to the rivate sector. * Corresonding author. Tel addresses: m.aram@aminib.com (M. Aram) 2011 Growing Science Ltd. All rights reserved. doi: /j.msl

2 550 The below table shows the most frequently used method of rivatization in Iran is share issue rivatization through Tehran stock market. Table 1 Privatization method in Iran in terms of divestiture method Privatization in Terms of Divestiture Method Total Value of Privatizations (USD Billion) Year Exchange (USD Billion) % of Aggregate Privatizations 0.05% 3% 19% 23% 17% 5% 3% 69.50% OTC(USD Billion) % of Aggregate Privatizations 0.04% 3.01% 0.16% 3.20% Tender(USD Billion) % of Aggregate Privatizations 0.29% 0.08% 0.01% 0.38% Negotiation(USD Billion) % of Aggregate Privatizations 0.04% 0.07% 10.28% 2.38% 3.41% 9.29% 1.45% 26.92% Total Value of Privatizations (USD Billion) % of Aggregate Privatizations 0.09% 2.98% 29.36% 25.25% 21.03% 17.09% 4.19% % Source: Iranian Privatization organization(ipo) The urose of this research is to design a comatible model for share issue rivatization (SIP) of state owned enterrises (SOEs) in a way which leads to Tehran stock exchange (TSE) develoment. To achieve this objective, initial ublic offering rice index (IPIX) is designed as a barometer to reflect rice fluctuations of shares of 19 rivatized comanies in TSE. To reveal the ositive imact of SIPs on TSE, the relation of IPIX and TSE develoment roxies is statistically considered by the use of E-Views software. To design the otimal model of share issue rivatization through TSE, Delhi questionnaires in a two-stage rocess are distributed among rivatization secialists in Iranian rivatization organization (IPO), stock market secialists in securities and exchange organization of Iran (SEO), Tehran Stock Exchange (TSE) and rofessors of investment and finance. The oututs of survey are analyzed by the use of SSPS software. The result of study shows a significant relation among TSE develoment roxies and, rivatization IPOs index, IPIX. Then it suggests a share issue rivatization model for TSE develoment. The organization of this aer is as follows. We first study rivatization and rivatization models. Then revious research works are considered. Methodology of research is resented in section 2.The results of statistical studies are resented in section 3. Discussions, concluding remarks, research limitations and recommendations are given in section 4 to summarize the contribution of this aer Privatization Models In theory, rivatization can result in economic gains, ever in cases where market failure may justify some level of government intervention. In ractice, rivatization, as an economic growth tools, has increased rofitability and efficiency. For instance, Poland as the second most active rivatizer among Euroean countries reflects the country s much more robust rate of economic growth and greater financial dynamism as a the results of adating rivatization rograms (The Privatization Barometere Reort, 2010,. 3). Two decades of rivatization aears to have changed the focus of the rivatization debate from "whether to rivatize" to" how to rivatize". The most commonly used methods of rivatization include ublic offering of shares or share issue rivatization (SIP), rivate sale of enterrises, sale of enterrise assets to rivate investors and voucher method. Public offering of shares, or share issue rivatization (SIP), involves the sale of some or a government's entire stake in an enterrise through ublic share offering. The underwriter may use a fixed rice or a tender to determine the initial share value. This method rovides investment oortunity to a large class of citizens while also generating more revenue for the government. Its successful imlementation requires rofessional investment bankers and an active stock market that

3 M. Aram Bonyar et al. / Management Science Letters 2 (2011) 551 many develoing countries lack. Successful examles in develoing countries include Brazil's Petrobras and Banco do Brasil; Chile's Chilquinta Electricity and Entel Telecom; Turkey's Teletas and Netas Telecommunication; Singaore's Airlines, DBS Bank, and Iron & Steel Mills; Malaysia's MAS Airlines and Malaysia Shiing; and Sri Lanka's State Rubber. The theoretical framework and the result of former researches show that, oularly, share issue rivatization leads to boost the degree of liquidity as the main market develoment roxy (Jafari Seresht, 2010). In general, ublic sale of enterrises aears to have a good track record in Eastern Euroe, and articularly in countries where rivate sector is relatively strong. This method has the otential to be successful in Iran as well because of Iran's long exerience with free enterrise and the resolve of the government to exand rivate ownershi through rivatization. In addition, Iran has in lace a system of roerty rights and a legal framework for cororate conduct. Therefore, ublic sale of comanies through stock market (offering of shares) or auction aears to be the most aroriate method of rivatization in Iran (Dezhbakhsh, 2004). In a research undertaken by Dalsenius (2007), " Effects of Stock Market Liquidity on Growth: Emirics and Theory", the market liquidity is examined and confirmed as a significant caital market develoment roxy in a samle comrises a grou of develoed and develoing countries. Investors refer markets with high degree of liquidity. Therefore, liquidity lays a vital role in market growth and develoment (IOSCO, 2007). Naceur et al. (2007) studied saving rate, articiation of financial intermediaries and market liquidity of 12 countries in Middle East and north of Africa. They concluded that these factors lay imortant roles in market develoment and market develoment, itself, has a crucial effect on economic growth (Naceur et al., 2007). The average initial ublic offering outside the United States of America reorted in research aers written by Laurent et al. (1994), although differ substantially in different markets and times, but is less than $ 15 million. In addition to being very large according to the standards of the shares offered by the rivate sector, share issue rivatizations (SIPs) are the largest tye of rivatization through the securities market. Megginson (2001) reort that the average size of 1526 assets sales of SOEs erformed during eriod is 290 million dollars (median million dollars) comared with an average 799 million dollars (105 million median) for the 931 shares issue rivatizations through the securities market. The first comany subject to rivatization law, The National Iranian Coer Industry Cororation, enters into TSE in February During the 5 years time, market caitalization increased dramatically from USD billion in February 2007 to USD billion in June 2011, at the same time market value of rivatization IPOs on the exchange also raised from 2.14 USD billion to USD billion during this eriod. The TSE was reactivated during this time, artly to imlement the ublic sale of government owned enterrises. The rivatized comanies constitute 46% of TSE market caitalization on June The number of share traded on the TSE becomes triled over the time eriod February June The stock market oularly has maintained its growth, although at a more moderate ace. The TSE index (TEPIX) skyrocketed from around 9,836 to 25,214 during the February June A similar increase in the transaction volume suggests that the stock market is gaining the much-needed accetability by a ublic that has too few choices for longterm investment. 1.2 Privatization Process in Globe The theoretical sequence of rivatization is not mentioned in revious researches. However, according to government of Pakistan, the followings are introduced as general rivatization rocess in globe. Identification and an entity for rivatization Cabinet committee of rivatization (CCOP)/ cabinet aroval

4 552 Aointment of financial advisor (FA) for major transaction(s) with aroval of rivatization cabinet (PC) board Aointment of valuator where FA is not hired Due diligence by FA/valuator Privatization strategy Restructuring, sectoral/ regulatory reforms if required Exressions of interest (EOI) Screening-statement of qualification (SOQ) Pre-qualification Due diligence by otential bidder(s) Valuation aroved by PC board and CCOP Pre-bid conference(s) Bidding rocess aroval by board and CCOP Oen bidding: media invited to observe Board and CCOP arove rice and bidder Letter of accetance to successful bidder Management transfer (through execution of share urchase agreement/asset sale agreement) after 100% receit of ayment. 1.3 Theoretical Framework of Share Issue Privatization Process in Globe In accordance with finance literature, the global theoretical framework of share issue rivatization is as below: Prearation, Due Diligence: financial, legal and technical, Valuation, Issuing Registration Reort, Prosectus, Marketing: domestic, international, Dual Listing, IPO Price Discovery: there are three different methods namely book building, fixed rice and auction. Auction itself is of two main methods; Dutch and England. Market Making: In some countries concentrated market making is in use and in the other nonconcentrated. Each of market making methods can be quote driven or order driven. 2. Methodology of research To reflect the imact of rivatization IPOs on Tehran stock exchange (TSE), initial ublic offering rice index (IPIX) is comuted. This index is calculated on the basis of Laseyres index rinciles and resents the changes in rivatization IPOs during research eriod. Then, to estimate the relation of share issue rivatizations on Tehran stock exchange, some of market develoment roxies (transaction volume, turn over velocity ratio indicating market liquidity, Tehran stock market rice index (TEPIX) and closing rice) are used. We tested our research hyotheses using co integration and error correction models. To increase accuracy of study, both anel data and time series of data are entered into econometric models. Afterwards to design a comatible model of share issue rivatization for Tehran stock market develoment a two round Delhi survey following Schemitt aroach in 4 hases was conducted. A samle of 38 financial and economic secialists was selected from exerts in securities and exchange organization of Iran (SEO), Tehran stock exchange (TSE), Iranian rivatization organization (IPO),

5 M. Aram Bonyar et al. / Management Science Letters 2 (2011) 553 Investment banks and finance rofessors. They all hold master s and doctorate degrees in their discilines. Prosective articiates understood that they would comlete two rounds of surveys in one month interval and the study was conducted during In the beginning, articiants received through mail the first questionnaire comrising questions about the relation of share issue rivatization and Tehran stock market develoment and actions during share issue rivatization contributing Tehran stock market develoment. After one month, the second questionnaire was mailed to them, comrising questions about the sequence and degree of imortance of share issue rivatization stes for Tehran stock market develoment. Method of rearation of data and variables, roblem discussion, econometric models, research hyotheses and the results of statistical tests are recisely resented in tables given below Research variables Table 2 Research variables along with their exlanations Variables TEPIX IPIX Formula Index Level=Base level n q i i i1 Index= 100 Base n i=1 X No si ci ffi i b adj1 Comment According to Laseyers rincile According to Laseyers rincile Turn Over Velocity Ration Transaction Volume Price Closing Monthly EOB domestic share turn over Turn over velocity ratio= 12 Month end domestic market caitalization _ VWAP= Number of share traded in each transaction Share rice in each transaction Total Number of share traded during a working day World Federation of Exchange Number of Shares Traded During A Working Day Weighted Average of Prices During a Working Day Table 3 Different aroaches along with their methods of evaluation Aroaches Research Variables Econometric Models Data Deendent Indeendent Research Hyotheses 1st hyothesis IPIX growth ositively affects closing rice 2nd hyothesis IPIX growth ositively affects TSE transaction volume 3rd hyothesis IPIX growth ositively affects TSE liquidity Panel Data Co integration Error correction Model (ECM) Simle Data Initial Public Offering Price Index(IPIX) Closing Price of each TSE Listed Comany Turn over Velocity Ratio of each TSE Listed Comany Transaction Volume of Each TSE Listed Comany Results Acceted Acceted Acceted

6 Statistical Analysis and Results 3.1 Privatization Index and TSE Market Develoment Proxies In this section of research, to consider the imact of rivatization index (IPIX) on key market variables; closing rice, transaction volume and velocity of transactions, during March 2008 till June2011, anel data of 202 comanies are entered into model. Table 4 demonstrates the descrition of the variable used in this aer. Table 4 Variable descrition using anel data (Row Data) Closing Price Trade volume Mean Median Maximum Minimum Standard deviation Skewness Kurtosis Jarque-Bera Probability Testing for Unit Roots in Panel Data Velocity Ratio E IPIX According to results of unit root test, all of the variables in their level have unit roots. However, they become stationary after differentiation. To consider the interrelation among non-stationary variables, co integration model shall be used. To this end, the below hyotheses are tested. 3.3 Research Hyotheses First Hyothesis: Privatization Index (IPIX) Growth Positively Affects Closing Price Estimation of a vector auto regression model and the number of otimal lags are the stes shall be taken before estimating a co integrated model. The vector auto regression model for the first hyothesis is as below: Closing Price c Last Price IPIX i,t 1 it, i it, i Last Price i1 i1 (1) Estimation of the otimal number of lags in the above auto regression model makes it ossible to comute the co integration model by the number of lags. Presence of long-run relationshi between two variables is already aroved. So, co integration model of closing rice and IPIX can be estimated. The results of estimation with evaluation of adjustment factor are as below: IPIX c IPIX Last Price it, 2 it, i i,t-i IPIXt i1 i * * t 1 i,t-1 Ixit, 1 1i i,t-i 1 i Ixit, i Last Pricei, t i1 i1 Last Price (Last Price ) Last Price * * i,t 2(Last Price i,t-1 it, 1) 2i Last Pricei,t-i 2 i it, i Ixti, t i1 i1 Ix Ix Ix Estimation of above error correction model is in Table 5 as follows, (2) (3) (4)

7 M. Aram Bonyar et al. / Management Science Letters 2 (2011) 555 Table 5 Estimation of error correction model variable co integration equation D(IPIX(-1)) D(IPIX(-2)) D(IPIX(-3)) D(IPIX(-4)) D(IPIX(-5)) coefficient t- statistic [ ] [ ] [ ] [ ] [ ] [ ] variable D(IPIX(-6)) D(IPIX(-7)) D(IPIX(-8)) D(IPIX(-9)) D(IPIX(-10)) C coefficient t- statistic [ ] [ ] [ ] [ ] [ ] [ ] The quantity of coefficient of deviation from equilibrium ath is equal to This is statistically significant. It means; aroximately 0.1% is deducted from deviation in equilibrium ath of two variables in each eriod. Level of Significance of this coefficient tells us those two variables reach to an equilibrium ath in long-run. The equation of long-run equilibrium relation of two variables (IPIX and Closing Price) is shown hereunder: Table 6 Long-run Relation of IPIX & Closing Price variable IPIX(-1) C coefficient t- statistic [ ] As it can be seen from calculated quantities related to long-term relation of two variables, IPIX has significant ositive effect on closing rice of TSE listed comanies during research eriod. Second Hyothesis: Privatization Index (IPIX) Growth Positively Affects Transaction Volume Estimation of a vector auto regression model and the number of otimal lags are the stes shall be taken before estimating a co integrated model. The vector auto regression model for the second hyothesis is as below: IPIX c IPIX Transaction volume it, 2 it, i i,t-i IPIXt i1 i1 Transaction volume c Transaction volume Ix i,t 1 i,t-i it, i Transaction volume i1 i1 Table 7 Estimation of Error Correction Model (ECM) variable co integration equation D(IPIX(-1)) D(IPIX(-2)) D(IPIX(-3)) D(IPIX(-4)) D(IPIX(-5)) variable C coefficient coefficient t- statistic [ ] [ ] [ ] [ ] [ ] [ ] t- statistic [ ] The quantity of coefficient of deviation from equilibrium ath is equal to This is statistically significant. It means; aroximately 0.32% is deducted from deviation in equilibrium ath of two variables in each eriod. Level of significance of this coefficient tells us these two variables reach to an equilibrium ath in long-run. The equation of long-run equilibrium relation of two variables (IPIX and Transaction volume) is shown hereunder: Table 8 Long- run Relation of IPIX & Transaction Volume variable C coefficient t- statistic [ ] [ ] (5) (6)

8 556 As it can be seen from calculated quantities related to long-term relation of two variables, IPIX has significant ositive effect on transaction volume of TSE listed comanies during research eriod. Third Hyothesis: Privatization Index (IPIX) Growth Positively Affects TSE Liquidity Estimation of a vector auto regression model and the number of otimal lags are the stes shall be taken before estimating a co integrated model. The vector auto regression model for the third hyothesis is as below: Velocity Ratio IPIX c Velocity Ratio Ix i,t 1 i,t-i it, i Velocity Ration i1 i1 c IPIX Velocity Ratio i,t 2 i,t-i it, i IPIXt i1 i1 Estimation of above error correction model is summarized in Table 9 as follows, (7) (8) Table 9 Estimation of Error Correction Model (ECM) variable co integration equation D(IPIX(-1)) D(IPIX(-2)) D(IPIX(-3)) D(IPIX(-4)) D(IPIX(-5)) variable C coefficient E E E E E-08 coefficient -4.52E-05 t- statistic [ ] [ ] [ ] [ ] [ ] [ ] t- statistic [ ] The quantity of coefficient of deviation from equilibrium ath is equal to This is statistically significant. It means; aroximately 0.79% is deducted from deviation in equilibrium ath of two variables in each eriod. Level of significance of this coefficient tells us these two variables reach to an equilibrium ath in long-run. The equation of long-run equilibrium relation of two variables (IPIX and Turn over velocity ratio) is shown hereunder: Table 10 Long-run Relation of IPIX Turn over Velocity Ratio variable IPIX(-1) TREND C coefficient 3.03E E t- statistic [99.1]119 [ ] As it can be seen from calculated quantities related to long-term relation of two variables, IPIX has significant ositive effect on turn over velocity ratio of TSE listed comanies during research eriod. In accordance with the findings of regression analysis, all three research hyotheses are acceted. In other word, closing rice, transaction volume and turn over velocity ratio of shares of TSE listed comanies increase as rivatization IPOs lifts during research eriod. To design a comatible method of share issue rivatization for Tehran stock market (TSE) develoment Delhi method exerts from the required discilines are first identified and asked to articiate in the inquiry. The anel include Iranian rivatization organization (IPO) secialists (13.5%), stock market secialists in securities and exchange organization of Iran 21.6%, Tehran stock exchange 21.6%, investment banks, brokerage comanies & financial consulting firms and investment and finance rofessors(43.2%) who are exerts in the rivatization and stock market functions. The number of Delhi anel is Delhi Technique The imlementation of Delhi questionnaire follows the Schmitt aroach. First Phase Brain Storming to determine a list of share issue rivatization rocesses and activities

9 M. Aram Bonyar et al. / Management Science Letters 2 (2011) 557 Second Phase: Considering and recognizing different activities, ooling different ideas and shortlist the most contributive ones Third Phase: Ranking the most contributive activities Fourth Phase: Reetition to achieve unity in exerts' oinions about recognized activities in second hase and the final ranking According to majority of Delhi anel exerts' resonses cororate restructuring, valuation, domestic road show and market making are the most imortant stes during share issue rivatization rocess. It means for success of share issue rivatization causing Tehran stock market develoment these stes must be considered, designed and imlemented more cautiously. Poularly, change in IPO rice discovery from current method (English auction) to other common methods (book building, fixed rice with/without underwriting) is known ineffective to design a share issue rivatization model with develoment imact on Tehran stock exchange. The result in second round of Delhi is almost the same as first round. Share issue rivatization (SIP) model for Tehran Stock Exchange develoed according to the results of round #2 is resented in Aendix. Table 11 SIP Method for Tehran Stock Market Develoment in Rounds# 1 and 2 Preferred SIP Method Via TSE by Delhi Panel in Round #1 in Round #2 1 CREST 78.40% CREST 57.1% New Rules 48.60% 2 DD& Investors Confidence 67.60% DD 34.3% DD& Pre IPO Success 48.60% 3 Valuation to Determine Base Price IPO 73.00% Valuation and Success of IPO 64.90% Valuation 71.4% 3 Prosectus 59.50% Prosectus 42.9% 4 Domestic Road show 56.80% International Road show 13.50% Domestic Road show 62.9% 5 Book Building 32.40% Fixed Price 35.10% IPO Method 34.3% 6 Market Making 62.20% Market Making 57.1% 7 Dual 18.90% 8 Foreigners 32.40% Oututs of Delhi questionnaire Analysis by Use of SPSS Software 4. Conclusion We begin by documenting the big imact of rivatization IPOs on Tehran stock exchange (TSE). And for this urose the initial ublic offering rice index (IPIX) is comuted. This index is calculated on the basis of Laseyres index rinciles and resents the changes in rivatization IPOs during research eriod. Then to estimate the relation of share issue rivatizations on Tehran stock exchange, some of market develoment roxies (transaction volume, turn over velocity ratio indicating market liquidity, Tehran stock market rice index (TEPIX) and closing rice) are used. We tested our research hyotheses using co integration and error correction models. To increase accuracy of study, both anel data and time series of data are entered into econometric models. Afterwards to design a comatible model of share issue rivatization for Tehran stock market develoment a two round Delhi survey was conducted. A samle of 38 financial and economic secialists are selected among exerts in securities and exchange organization of Iran (SEO), Tehran stock exchange (TSE), Iranian rivatization organization (IPO), Investment banks and finance rofessors. They all hold master s and doctorate degrees in their discilines. Prosective articiates understood that they would comlete two rounds of surveys at one month interval. The study was conducted during In the beginning, articiants received through mail the first questionnaire comrising 10 questions about the relation of share issue rivatization and Tehran stock market develoment and 15 questions asking about actions during share issue rivatization contributing Tehran stock market develoment.

10 558 After one month the second questionnaire was mailed to them, comrising 7 questions about the sequence and degree of imortance of share issue rivatization stes for Tehran stock market develoment. The results of statistical study shows that initial ublic offering rice index and Tehran stock exchange develoment roxies have a correlated ositive relation during To test research hyotheses, anel row data are entered into co integration and error correction models. The results show that imlementing a standard share issue rivatization model focusing more carefully on cororate restructuring, valuation, market making and road show stes, leads to Tehran stock exchange develoment. This seems sensible, because a comrehensive cororate restructuring makes the state owned enterrise subjecting to rivatization, more efficient and therefore more rofitable. Market making activities decline liquidity risk of rivatized comanies and simultaneously acts as a motivator to target investors. There is a tight correlation between the oututs of due diligence rograms and valuation of state owned enterrise. The value determined for enterrise reflects its ast erformance, future lans and resent status and therefore transmits loads of information to otential investors. Road show sessions, as a means to estimate market caacity for new offerings and to stimulate otential investors, lays a critical role in success of a share issue rivatization. As it is shown in the table, its imortance in success of share issue rivatization and stock market develoment is estimated u to 63% by Delhi anel. Table 12 Distinguished Share Issue Privatization Stes for TSE Develoment by Delhi Panel#2 1 Cororate Restructuring(CREST) Valuation Domestic Road show Market Making 57.1 However there are some limitations like lengthy rocess of share issue rivatizations in Iran, sanction atmoshere reventing foreign investors to articiate in share issue rivatizations in Iran and lack of formal due diligence organizations in Iran. The other roblem is that although the best method of market making is concentrated quote driven (or rice discovery), the dominant market making mechanism in Tehran stock exchange is non-concentrated order driven one. This is due to transaction system of Tehran stock exchange which is Euronext and its software which is PAM. Proosed research areas are synchronization of regulations of stock exchange and rivatization and review of its role in stock exchange develoment, studying behavioral attern of investors in share issue rivatizations and share offerings of family firms and finally caacity building in caital market to increase share issue rivatization. References Amihud, Y. et al. (1997), Market Microstructures and Securities Value, Journal of Financial Economics 45, Asian Develoment Bank (ADB) (2001). Secial Evaluation Study on the Privatization of Public Sector Enterrises: Lessons for Develoing Countries. Bortolotti, B., Fantini, M., & Siniscalco, D. (2004). Privatisation around the world: evidence from anel data. Journal of Public Economics, 88(102), Boubakri, N., Cosset, J. & Guedhami, O. (2008). Privatization in Develoing Countries: Performance and Ownershi Effects. Develoment Policy Review, 26(3), Bochner, S. E., & Finseth, E. J. (2004). Guide To The Initial Public Offering. Merrill Cororation. Boutchkova, M. & Megginson, W. (2000). Privatization and the rise of Global Caital Markets. Journal of Financial Management 29, Brooks, C. (2008). Introductory Econometrics for Finance. Cambridge University Press. Chiesa, G. & Nicodana, G. (2003). Privatization and Financial Market Develoment: Theoretical Issues. FEEM Working Paer.

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12 560 in Monte Carlo Exeriments. Working Paers 781, Queen's University, Deartment of Economics. Subrahmaniam, S. & Titman, S. (1999). The going ublic decision and the develoment of financial markets. Journal of Finance, 54, Soren, J. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, Elsevier, 12(2-3), Tehran Stock Market Reort (2011). Stock Market Statistic, Iran. Aendix 1 -Sureme Board of Divestiture - Council of Ministers -Policy Maker - Controlling& Suervisory Role -Issuing Offering Certificates -Secialized Mother Comanies -Investment Banks (IBs) Underwriting grou comiles underwriting agreement, memorandum of association and other imortant contracts to cite in rosectus -Iranian Privatization Organization (IPO) -Investment Banks (IBs) Share Issue Privatization Model for TSE Develoment in Round#2 Prearation Due Diligence Valuation Issuing Registration Reort by Issued by -Licenses& Certificates -Cororate Restructuring -Changing from PJS to PJSC -Conversion of bearer shares to registered shares -Financial -Legal -Technical -Issuing Valuation Reort -Determining Base Price of IPO TSE SEO IPO Prosectus Issued by IBs Marketing Domestic IPO Price Discovery Auction English -Investment Banks (IBs) -Securities Firms Market Making Nonconcentrated Order Driven