Do Privatization IPO Firms Outperform in the Long-Run?

38 Pages Posted: 28 Feb 2005

See all articles by Seung-Doo Choi

Seung-Doo Choi

Dongeui University - School of Business

Inmoo Lee

KAIST College of Business

William L. Megginson

University of Oklahoma

Date Written: November 7, 2006

Abstract

This paper investigates the long-run stock returns of privatization initial public offering (IPO) firms using a sample of 241 privatization IPOs from 42 countries during the period 1981-2003. We compare one- three-, and five-year holding period returns of the privatization IPOs to those of the domestic stock market indices and to those of size and size-and-book-to-market equity ratio (BM)-matched firms of respective countries. Consistent with previous studies, privatization IPOs significantly outperform their domestic stock markets in the long-run. However, they do not show any significant abnormal long-term stock performance relative to their size- or size-and-BM-matched benchmark firms. The results in the paper suggest that previous results on the long-run stock performance of privatization IPOs should be interpreted with caution. In addition, being different from private companies' IPOs, the market seems to value privatization IPO firms without much systematic bias after the IPO. This is consistent with privatization IPOs having less information asymmetry problems compared to private IPOs.

Keywords: Privatization, IPO, CAR, BHAR, Matched firm

JEL Classification: G32

Suggested Citation

Choi, Seung-Doo and Lee, Inmoo and Megginson, William L., Do Privatization IPO Firms Outperform in the Long-Run? (November 7, 2006). Available at SSRN: https://ssrn.com/abstract=676181 or http://dx.doi.org/10.2139/ssrn.676181

Seung-Doo Choi (Contact Author)

Dongeui University - School of Business ( email )

Busan, Busan
Korea

Inmoo Lee

KAIST College of Business ( email )

85 Hoegiro Dongdaemun-Gu
Seoul 02455
Korea, Republic of (South Korea)

William L. Megginson

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

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