Determinants of the Pricing of Privatization IPOs in the UK and Australia
Posted: 7 Jun 2008
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: Suggested Citation