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The Long-Run Return to Investors in Share Issue Privatizations

Author

Listed:
  • William L. Megginson
  • Robert C. Nash
  • Jeffry Netter
  • Adam L. Schwartz

Abstract

We examine the long-run returns earned by domestic, international, and US investors who purchase shares at the first open-market price in 158 share issue privatizations (SIPs) from 33 countries during the period 1981-1997. We compute one-, three-, and five-year net returns for domestic, international, and US market indexes, and industry-matched comparison samples. We find statistically significant positive net returns for the 158 unseasoned SIPs for all holding periods and compared with all benchmarks. Our findings contrast with the patterns reported in previous research for equity offerings of private firms in the US and other countries.

Suggested Citation

  • William L. Megginson & Robert C. Nash & Jeffry Netter & Adam L. Schwartz, 2000. "The Long-Run Return to Investors in Share Issue Privatizations," Financial Management, Financial Management Association, vol. 29(1), Spring.
    • Handle: RePEc:fma:fmanag:megginson00
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    Cited by:

    1. L. Cassia & G. Giudici & S. Paleari & R. Redondi, 2004. "IPO underpricing in Italy," Applied Financial Economics, Taylor & Francis Journals, vol. 14(3), pages 179-194.
    2. Wolf, C. & Pollitt, M.G., 2009. "The Welfare Implications of Oil Privatisation: A Cost-Benefit Analysis of Norway’s Statoil," Cambridge Working Papers in Economics 0912, Faculty of Economics, University of Cambridge.
    3. Ranko Jelic & Richard Briston & Wolfgang Aussenegg, 2003. "The Choice of Privatization Method and the Financial Performance of Newly Privatized Firms in Transition Economies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(7‐8), pages 905-940, September.
    4. 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.
    5. Stavros Thomadakis & Christos Nounis & Dimitrios Gounopoulos, 2012. "Long†term Performance of Greek IPOs," European Financial Management, European Financial Management Association, vol. 18(1), pages 117-141, January.
    6. Chi, Jing & McWha, Matthew & Young, Martin, 2010. "The performance and the survivorship of New Zealand IPOs," International Review of Financial Analysis, Elsevier, vol. 19(3), pages 172-180, June.
    7. 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.
    8. Christodoulakis, George & Mohamed, Abdulkadir & Topaloglou, Nikolas, 2018. "Optimal privatization portfolios in the presence of arbitrary risk aversion," European Journal of Operational Research, Elsevier, vol. 265(3), pages 1172-1191.
    9. T T Ram Mohan, 2007. "Privatization and FDI: the Indian expeprience," ASARC Working Papers 2007-20, The Australian National University, Australia South Asia Research Centre.
    10. Saffar, Walid, 2014. "The political economy of share issue privatization: International evidence," Journal of Multinational Financial Management, Elsevier, vol. 24(C), pages 1-18.
    11. 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.
    12. Mohammed Omran, 2002. "Initial and Aftermarket Performance of Egyptian Share Issue Privatization," Working Papers 0227, Economic Research Forum, revised 19 Sep 2002.
    13. Yu, Ming-Miin & Fan, Chih-Ku, 2008. "The effects of privatization on return to the dollar: A case study on technical efficiency, and price distortions of Taiwan's intercity bus services," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(6), pages 935-950, July.
    14. McGraw, Patricia A., 2005. "Privatization and the Corporate Cost of Capital in New Zealand: An Application of Fama and French (1999)," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 1(1), pages 1-25, June.
    15. Wolfgang Aussenegg, 2000. "Privatization versus Private Sector Initial Public Offerings in Poland," Multinational Finance Journal, Multinational Finance Journal, vol. 4(1-2), pages 69-99, March-Jun.
    16. Sun, Qian & Tong, Wilson H. S., 2003. "China share issue privatization: the extent of its success," Journal of Financial Economics, Elsevier, vol. 70(2), pages 183-222, November.
    17. 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.
    18. Bulent Aybar, C., 2002. "The long-term performance of privatization-related ADR issues," Emerging Markets Review, Elsevier, vol. 3(2), pages 135-164, June.
    19. 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.
    20. Feng, Fang & Sun, Qian & Tong, Wilson H. S., 2004. "Do government-linked companies underperform?," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2461-2492, October.
    21. Harper, Joel T., 2002. "The performance of privatized firms in the Czech Republic," Journal of Banking & Finance, Elsevier, vol. 26(4), pages 621-649, April.
    22. Sabri Boubaker & Dimitrios Gounopoulos & Antonios Kallias & Konstantinos Kallias, 2017. "Management earnings forecasts and IPO performance: evidence of a regime change," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 1083-1121, May.
    23. Langnan Chen & Steven Li & Yijia Chen, 2005. "Corporate Governance and Corporate Performance: Some Evidence from Newly Listed Firms on Chinese Stock Markets," School of Economics and Finance Discussion Papers and Working Papers Series 204, School of Economics and Finance, Queensland University of Technology.

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