Initial and Aftermarket Performance of Share Issue Privatization in the Egyptian Stock Market

Abstract:     
The phenomenon of underpricing initial public offerings (IPOs) is documented for 53 share issue privatizations (SIPs) in Egypt between 1994 and 1998. Over several intervals (up to five years), I find mixed results: SIPs sustain their positive performance and provide investors with positive abnormal returns over a one-year period, however; my results document negative abnormal returns over 3- and 5-year horizons. The initial excess returns are determined by ex-ante uncertainty and times offer subscribed, while the aftermarket abnormal returns over a one-year period are driven by ex-ante uncertainty and price-earning ratio. However, over 3- and 5-year periods, abnormal returns are significantly affected by initial excess returns, price-earning ratio and, to a lesser extent, times offer subscribed. The empirical findings of this study are consistent with IPO markets in which investors are over-optimistic towards the performance of these issues but grow more pessimistic over time.

Number of Pages in PDF File: 30

Keywords: Privatization, Egypt, Initial Returns, and Aftermarket Performance

JEL Classification: G12, L33

working papers series