Identification and Validation of Barriers and Enabling Factors for Successful Implementation of Privatization through Exchange-Traded Funds (ETFs)

Abstract

Introduction: Privatization of state-owned assets through Exchange-Traded Funds (ETFs) has emerged as a novel approach, attracting significant attention from numerous countries. This method is often regarded as a tool for democratizing the economy, enabling broader public participation in the privatization process. Implementing this approach can enhance capital market depth, stimulate stock market activity, and create favorable conditions for economic development and social welfare. The primary objective of this study is to identify the critical barriers and enabling conditions necessary for the successful implementation of this privatization model. While various methods can be employed in the privatization process, leveraging the capacity of stock exchanges and their financial instruments particularly ETFs offers a modern and inclusive pathway. ETFs facilitate widespread public involvement in privatization and contribute to the dynamism of capital markets. However, given the relatively nascent nature of ETFs and their innovative application in privatization, it is essential to conduct a thorough examination of this instrument before its adoption at the national level. Successful implementation of this model requires the establishment of appropriate structural, legal, and operational frameworks and the removal of existing impediments. The researchers emphasize that although capital markets and modern financial tools such as ETFs hold substantial potential to transform privatization, desired outcomes may not be achieved without addressing associated challenges. Therefore, this paper aims to investigate these critical barriers and enablers to help fill a significant gap in the existing literature.

Method: The study employs a mixed-methods (qualitative-quantitative) research design. In the first phase, a qualitative approach using thematic analysis was applied. Semi-structured interviews were conducted with 20 experts from the fields of economics, finance, and capital markets to identify key barriers and facilitating factors. In the second phase, to validate and prioritize the qualitative findings, a fuzzy Delphi method was employed, and a structured questionnaire was distributed among 17 domain experts. This integrated approach significantly enhanced the credibility and reliability of the research outcomes.

Results and Discussion: The findings reveal that the most significant barrier to the successful implementation of ETF-based privatization is extensive governmental interference in the economy and capital markets. This interference manifests in various forms, including direct intervention in economic affairs, manipulation of stock prices, involvement in the management of privatized firms, and indirect influence through state-owned enterprises holding major stakes in ETFs factors that can undermine the operational independence of such funds. Additionally, low levels of investor knowledge and awareness increase perceived investment risk. Information asymmetry, earnings management practices, and insufficient financial literacy particularly among financial managers and fund administrators are also identified as major obstacles to the success of this model. Conversely, the findings indicate that establishing appropriate enabling conditions can have a substantial positive impact on the success of the ETF privatization model. Key enablers include: ease of trading ETFs, high diversification of asset portfolios, expertise and awareness of fund managers, sufficient capital inflow into funds, fund security, effective oversight by the stock exchange regulatory body, and high liquidity of ETFs. These factors collectively reduce investment risk, enhance investor confidence, and significantly improve the attractiveness and effectiveness of the privatization method.

Conclusion: The study emphasizes that the successful implementation of ETF-based privatization requires a comprehensive and systematic approach. This approach must encompass legal reforms to minimize unnecessary government intervention, the development of an investment-oriented culture through public education, enhanced transparency and independent oversight, and the training of specialized human capital in investment fund management. By precisely identifying critical barriers and success factors, this research represents a significant step toward evidence-based policymaking in the field of financial innovation and privatization. It serves as a valuable reference for policymakers, regulatory bodies, and academic researchers aiming to design effective and inclusive privatization strategies.