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The abnormal returns of UK privatisations: from underpricing tooutperformance

Listed author(s):
  • Massimo Florio


  • Katiuscia Manzoni

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.

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Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2002-23.

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Date of creation: 01 Jan 2002
Handle: RePEc:mil:wpdepa:2002-23
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