Underpricing and Long-Run Performance of Share Issue Privatizations in the Egyptian Stock Market

Posted: 27 May 2004

See all articles by Mohammed Omran

Mohammed Omran

The Insurance Holding Company; Arab Academy for Science and Technology

Abstract

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

Keywords: Underpricing, long-run performance, privatization

JEL Classification: G12, L33

Suggested Citation

Omran, Mohammed M., Underpricing and Long-Run Performance of Share Issue Privatizations in the Egyptian Stock Market. Available at SSRN: https://ssrn.com/abstract=550425

Mohammed M. Omran (Contact Author)

The Insurance Holding Company ( email )

7 Talet Herb Street
Cairo
Egypt

Arab Academy for Science and Technology ( email )

P.O. Box. 1029
College of Management and Technology
Miami, Alexandria
Egypt
(203) 5482 532 (Phone)
(203) 5566 072 (Fax)

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