The Abnormal Returns of UK Privatisations: From Underpricing to Outperformance

42 Pages Posted: 31 Oct 2002

See all articles by Massimo Florio

Massimo Florio

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Katiuscia Manzoni

City University London - Faculty of Finance

Date Written: October 2002

Abstract

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.

Keywords: Privatisation, Regulation, Abnormal Returns

JEL Classification: H32, G14, L33

Suggested Citation

Florio, Massimo and Manzoni, Katiuscia, The Abnormal Returns of UK Privatisations: From Underpricing to Outperformance (October 2002). FEEM Working Paper No. 83.2002, Cass Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=342922 or http://dx.doi.org/10.2139/ssrn.342922

Massimo Florio (Contact Author)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio 7
I-20122 Milano, 20122
Italy
+39 02 50321510 (Phone)
+39 02 50321505 (Fax)

HOME PAGE: http://www.demm.unimi.it/ecm/home

Katiuscia Manzoni

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain
020 7689 1440 (Phone)

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