Determinants of the Pricing of Privatization IPOs in the UK and Australia

Posted: 7 Jun 2008

See all articles by Jo-Ann Suchard

Jo-Ann Suchard

Financial Research Network (FIRN); UNSW Business School

Manohar Singh

Willamette University - Atkinson Graduate School of Management

Abstract

We examine the initial and long run performance and the determinants of underpricing of privatization IPOs in Australia and the United Kingdom. We include additional traditional variables from the privately owned IPO literature not used in other privatization studies and introduce three new variables specific to privatization. Although the process, characteristics and objectives of the privatization programs are similar, the results indicate that Australian privatization are significantly underpriced less, whereas U.K. privatization are underpriced significantly more, than IPOs of privately owned companies. Over the long term, Australian privatization insignificantly outperforms the market and performs significantly better than IPOs of privately owned companies. U.K. privatization significantly under-perform in the first year of listing but significantly outperform over three and five years. The cross sectional analysis supports ex ante uncertainty, signalling models, and the government's objective of wider share ownership.

Keywords: Privatization, IPOs, Performance

JEL Classification: G14, G32

Suggested Citation

Suchard, Jo-Ann and Suchard, Jo-Ann and Singh, Manohar, Determinants of the Pricing of Privatization IPOs in the UK and Australia. International Journal of Business, Vol. 12, No. 3, 2007, Available at SSRN: https://ssrn.com/abstract=1141360

Jo-Ann Suchard (Contact Author)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

UNSW Business School ( email )

high street
High St
sydney, NSW 2052
Australia

Manohar Singh

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States

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