Underpricing of New Equity Offerings by Privatized Firms: An International Test

52 Pages Posted: 11 Nov 2008

See all articles by Qi Huang

Qi Huang

Hofstra University - Department of Finance

Richard M. Levich

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1999

Abstract

In this paper, we study a large sample of 507 privatization offerings from 39 countries over the period 1979-1996. Our objectives are twofold. First, we document the extent of short-run underpricing of these privatization offerings and measure their variation across countries, industries, and years, as well as drawing comparisons to private company IPOs. Second, we test alternative explanations of the determinants of short-run underpricing drawing on various models of maximizing behavior by underwriters, augmented by variables that proxy for national political objectives. Overall, we find support for elements of asymmetric information theory, investor sentiment theory and the reputation building hypothesis. With the exception of the Gini coefficient, our political proxy variables are typically not significant. Thus to a significant degree, the investment banking strategies believed to characterize IPOs of private companies in industrial countries may also play a role in the IPO strategies of state-owned-enterprises in both industrial and lesser developed economies.

Keywords: Privatization, Underpricing, Initial public offerings, State-owned-enterprises

Suggested Citation

Huang, Qi and Levich, Richard M., Underpricing of New Equity Offerings by Privatized Firms: An International Test (September 1999). NYU Working Paper No. FIN-99-075. Available at SSRN: https://ssrn.com/abstract=1299443

Qi Huang (Contact Author)

Hofstra University - Department of Finance ( email )

Hempstead, NY 11550
United States
516-463-5354 (Phone)
516-463-4834 (Fax)

Richard M. Levich

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0422 (Phone)
212-995-4256 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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