IDEAS home Printed from https://ideas.repec.org/p/mil/wpdepa/2002-23.html
   My bibliography  Save this paper

The abnormal returns of UK privatisations: from underpricing tooutperformance

Author

Listed:
  • Massimo Florio
  • Katiuscia Manzoni

Abstract

This paper offers a review and discussion of the evidence concerning the underpricing and long run performance of British PIPOs (Privatisation Initial Public Offerings) between 1977-1996, i. e. from the first privatisation under a Labour Government (British Petroleum), until the last ones by a Conservative Government (Railtrack). We exclude more recent years because the change of government, the introduction of a windfall tax on excess profits of regulated utilities, and changes in the regulatory regime, mark a totally different landscape as compared with the previous twenty years. We find evidence that underpricing was not followed by underperformance, as is usually observed with IPOs, but rather strong outperformance. We decompose this trend by subgroups within a 55 observations sample, and conclude that lax regulation was probably the main driving force between abnormal returns of British PIPOs.

Suggested Citation

  • Massimo Florio & Katiuscia Manzoni, 2002. "The abnormal returns of UK privatisations: from underpricing tooutperformance," Departmental Working Papers 2002-23, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2002-23
    as

    Download full text from publisher

    File URL: http://wp.demm.unimi.it/files/wp/2002/DEMM-2002_023wp.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Perotti, Enrico C. & van Oijen, Pieter, 2001. "Privatization, political risk and stock market development in emerging economies," Journal of International Money and Finance, Elsevier, vol. 20(1), pages 43-69, February.
    2. Hayri, Aydin & Yilmaz, Kamil, 1997. "Privatisation and Stock Market Efficiency: The British Experience," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(2), pages 113-133, May.
    3. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    4. Qi Huang & Richard M. Levich, 1999. "Underpricing of New Equity Offerings by Privatized Firms: An International Test," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-075, New York University, Leonard N. Stern School of Business-.
    5. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, December.
    6. Jones, Steven L. & Megginson, William L. & Nash, Robert C. & Netter, Jeffry M., 1999. "Share issue privatizations as financial means to political and economic ends," Journal of Financial Economics, Elsevier, vol. 53(2), pages 217-253, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bruno Viani, 2011. "Can Governments signal commitment in privatization sales?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 197(2), pages 87-110, June.
    2. Haykel Hamdi & Duc Khuong Nguyen & Hassan Obeid, 2014. "The short- and long-term performance of privatization initial public offerings in Europe," Working Papers 2014-241, Department of Research, Ipag Business School.
    3. Jupe, Robert, 2012. "The privatization of British Energy: Risk transfer and the state," Accounting, Organizations and Society, Elsevier, vol. 37(2), pages 116-129.
    4. Au Yong, Hue Hwa & Laing, Elaine, 2021. "Stock market reaction to COVID-19: Evidence from U.S. Firms’ International exposure," International Review of Financial Analysis, Elsevier, vol. 76(C).
    5. Emanuele Bacchiocchi & Massimo Florio, 2008. "Privatisation and aggregate output: testing for macroeconomic transmission channels," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(5), pages 525-545, December.
    6. Massimo Florio, 2009. "The American Crisis: Travel Notes," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, May.
    7. Del Bo, Chiara D. & Ferraris, Matteo & Florio, Massimo, 2017. "Governments in the market for corporate control: Evidence from M&A deals involving state-owned enterprises," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 89-109.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bortolotti, Bernardo & de Jong, Frank & Nicodano, Giovanna & Schindele, Ibolya, 2007. "Privatization and stock market liquidity," Journal of Banking & Finance, Elsevier, vol. 31(2), pages 297-316, February.
    2. Bernardo Bortolotti & Marcella Fantini & Domenico Siniscalco, 2001. "Privatisation Around the World: New Evidence from Panel Data," CESifo Working Paper Series 600, CESifo.
    3. Boggio, Margherita, 2011. "From Reluctant Privatization to Municipal Capitalism: an Overview on Ownership, Political Connections and Decentralization," MPRA Paper 46232, University Library of Munich, Germany.
    4. Bortolotti, Bernardo & Fantini, Marcella & Siniscalco, Domenico, 2004. "Privatisation around the world: evidence from panel data," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 305-332, January.
    5. Chen, Ruiyuan & El Ghoul, Sadok & Guedhami, Omrane & Wang, He, 2017. "Do state and foreign ownership affect investment efficiency? Evidence from privatizations," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 408-421.
    6. Carla Vieira & Ana Paula Serra, 2006. "Abnormal Returns in Privatization Public Offerings: The case of Portuguese firms," Notas Económicas, Faculty of Economics, University of Coimbra, issue 23, pages 6-34, June.
    7. Enrico C. Perotti & Luc Laeven & Pieter van Oijen, 2000. "Confidence Building in Emerging Stock Markets," William Davidson Institute Working Papers Series 366, William Davidson Institute at the University of Michigan.
    8. Laura Cabeza García & Silvia Gómez Ansón, 2012. "What Drives the Operating Performance of Privatised Firms?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(1), pages 1-27, February.
    9. Nandini Gupta, 2001. "Partial Privatization and Firm Performance: Evidence from India," Industrial Organization 0112002, University Library of Munich, Germany.
    10. Boubakri, Narjess & Cosset, Jean-Claude & Saffar, Walid, 2013. "The role of state and foreign owners in corporate risk-taking: Evidence from privatization," Journal of Financial Economics, Elsevier, vol. 108(3), pages 641-658.
    11. Boubakri, Narjess & Cosset, Jean-Claude & Saffar, Walid, 2008. "Political connections of newly privatized firms," Journal of Corporate Finance, Elsevier, vol. 14(5), pages 654-673, December.
    12. Ingolf Dittmann & Ernst Maug & Christoph Schneider, 2008. "How Preussag Became TUI: A Clinical Study of Institutional Blockholders and Restructuring in Europe," Financial Management, Financial Management Association International, vol. 37(3), pages 571-598, September.
    13. Bel, Germa, 2003. "Confidence building and politics in privatization: some evidence from Spain," Economics Letters, Elsevier, vol. 78(1), pages 9-16, January.
    14. Narjess Boubakri & Jean‐Claude Cosset & Houcem Smaoui, 2009. "Does Privatization Foster Changes In The Quality Of Legal Institutions?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 32(2), pages 169-197, June.
    15. Seung-Doo Choi & Sang-Koo Nam, 2006. "The Long-Run Stock Performance of Privatization IPOs," Multinational Finance Journal, Multinational Finance Journal, vol. 10(3-4), pages 223-250, September.
    16. Anastassios Gentzoglanis, 2002. "Privatization, Investment and Efficiency in the Telecommunications Industry: Theory and Empirical Evidence from MENA Countries," Working Papers 0230, Economic Research Forum, revised 10 Oct 2002.
    17. N.F. Cruz & R.C. Marques & A. Marra & C. Pozzi, 2014. "Local Mixed Companies: The Theory And Practice In An International Perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(1), pages 1-9, March.
    18. Orietta DESSY & Massimo FLORIO, 2004. "Workers' earnings in the UK before and after privatisation: a study of five industries," Departmental Working Papers 2004-13, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    19. Ornella Tarola, 2010. "Public Utilities: Privatization without Regulation," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 4(1), pages 062-078, March.
    20. Michael A. Crew & Paul R. Kleindorfer, 2013. "Privatization of postal operators: old arguments and new realities," Chapters, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Reforming the Postal Sector in the Face of Electronic Competition, chapter 1, pages 1-19, Edward Elgar Publishing.

    More about this item

    Keywords

    Privatisation; regulation; abnormal returns;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mil:wpdepa:2002-23. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: DEMM Working Papers (email available below). General contact details of provider: https://edirc.repec.org/data/damilit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.