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Underpricing And Long-Run Performance Of Share Issue Privatizations In The Egyptian Stock Market

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  • Mohammed Omran
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    Abstract

    The underpricing of initial public offerings (IPOs) is documented for 53 share issue privatizations in Egypt between 1994 and 1998. Over several intervals (up to five years), I find mixed results: share issue privatizations sustain their positive performance and provide investors with positive abnormal returns over a one-year period; however, my results document negative abnormal returns over three- and five-year horizons. The initial excess returns are determined by ex ante uncertainty and oversubscription, whereas the aftermarket abnormal returns over a one-year period are driven by ex ante uncertainty and the price-earnings ratio. However, over three- and five-year periods, abnormal returns are significantly affected by initial excess returns, the price-earnings ratio, and, to a lesser extent, oversubscription. The empirical findings are consistent with IPO markets in which investors are overoptimistic about the performance of these issues but grow more pessimistic over time. 2005 The Southern Finance Association and the Southwestern Finance Association.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 28 (2005)
    Issue (Month): 2 ()
    Pages: 215-234

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    Handle: RePEc:bla:jfnres:v:28:y:2005:i:2:p:215-234

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    Web page: http://www.southwesternfinance.org/
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    Cited by:
    1. Rim Ben Hassen & Omri Abdelwahed, 2014. "Privatization of Tunisian Companies: A Study of Corporate Governance Mechanisms," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 94-104, April.
    2. Omran, Mohammed, 2009. "Post-privatization corporate governance and firm performance: The role of private ownership concentration, identity and board composition," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 658-673, December.
    3. Boubakri, Narjess & Bouslimi, Lobna, 2010. "Analyst following of privatized firms around the world: The role of institutions and ownership structure," The International Journal of Accounting, Elsevier, vol. 45(4), pages 413-442, December.
    4. Omran, Mohammed, 2007. "Privatization, State Ownership, and Bank Performance in Egypt," World Development, Elsevier, vol. 35(4), pages 714-733, April.
    5. repec:hur:ijaraf:v:4:y:2014:i:2:p:98-108 is not listed on IDEAS
    6. Girard, Eric & Omran, Mohamed, 2007. "What are the risks when investing in thin emerging equity markets: Evidence from the Arab world," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(1), pages 102-123, February.
    7. Samarakoon, Lalith P., 2010. "The short-run underpricing of initial public offerings in the Sri Lankan stock market," Journal of Multinational Financial Management, Elsevier, vol. 20(4-5), pages 197-213, December.
    8. Al-Hassan, Abdullah & Delgado, Fernando & Omran, Mohammed, 2010. "The under-pricing of IPOs in the Gulf cooperation council countries," Research in International Business and Finance, Elsevier, vol. 24(3), pages 344-360, September.
    9. International Monetary Fund, 2007. "Ipo Behavior in Gcc Countries," IMF Working Papers 07/149, International Monetary Fund.

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