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Do Privatization IPOs Outperform in the Long Run?

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  • Seung‐Doo Choi
  • Inmoo Lee
  • William Megginson

Abstract

This paper investigates the long‐run stock returns of privatization initial public offering (IPO) firms using a sample of 241 privatization IPOs from 42 countries during the period 1981‐2003. We compare one‐, three‐, and five‐year holding period returns of privatization IPOs to those of the domestic stock market indices and to size and size‐ and book‐to‐market equity ratio (BM)‐matched firms from the same countries. Consistent with previous studies, we find that privatization IPOs significantly outperform their domestic stock markets in the long run. However, they show less consistent abnormal long‐term stock performance relative to their size or size‐ and BM‐matched benchmark firms.

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  • Seung‐Doo Choi & Inmoo Lee & William Megginson, 2010. "Do Privatization IPOs Outperform in the Long Run?," Financial Management, Financial Management Association International, vol. 39(1), pages 153-185, March.
    • Handle: RePEc:bla:finmgt:v:39:y:2010:i:1:p:153-185
    DOI: 10.1111/j.1755-053X.2010.01069.x
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    3. 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.
    4. Boulton, Thomas J., 2022. "Economic policy uncertainty and international IPO underpricing," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    5. Naaguesh Appadu & Anna Faelten & Mario Levis, 2013. "Acquisitions, SEOs, divestitures and IPO performance," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 17, pages 347-374, Edward Elgar Publishing.
    6. Mara Faccio, 2010. "Differences between Politically Connected and Nonconnected Firms: A Cross‐Country Analysis," Financial Management, Financial Management Association International, vol. 39(3), pages 905-928, September.
    7. Henna Malik & Malik Muhammad Shehr Yar & Attiya Yasmin Javid, 2017. "New Issues Puzzle: Experience from Karachi Stock Exchange," Working Papers id:12182, eSocialSciences.
    8. Paul B. McGuinness, 2016. "Post-IPO performance and its association with subscription cascades and issuers’ strategic-political importance," Review of Quantitative Finance and Accounting, Springer, vol. 46(2), pages 291-333, February.
    9. Borisova, Ginka & Yadav, Pradeep K., 2015. "Government ownership, informed trading, and private information," Journal of Corporate Finance, Elsevier, vol. 33(C), pages 196-211.
    10. Sun, Feifan & Yin, Chen & Zhou, Sili & Zhu, Zijing, 2022. "IPO underpricing and mutual fund allocation: New evidence from registration system," International Review of Financial Analysis, Elsevier, vol. 84(C).
    11. Que, Jiangjing & Zhang, Xueyong, 2019. "Pre-IPO growth, venture capital, and the long-run performance of IPOs," Economic Modelling, Elsevier, vol. 81(C), pages 205-216.

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