Do Privatization IPOs Outperform in the Long-Run?

40 Pages Posted: 18 Jan 2007 Last revised: 15 Jul 2008

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: July 12, 2008


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 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 from the same countries. Consistent with previous studies, we find that privatization IPOs significantly outperform their domestic stock markets in the long-run. However, they show less consistent abnormal long-term stock performance relative to their size- or size-and-BM-matched benchmark firms. These results confirm the problems inherent in estimating long-run abnormal returns. Additionally, the market values privatization IPOs without much systematic bias after the IPO, in contrast to private companies' IPOs. This is consistent with privatization IPOs having less information asymmetry than private IPOs

Keywords: Privatization, International financial markets, Government policy and regulation

JEL Classification: G32, G15, G38

Suggested Citation

Choi, Seung-Doo and Lee, Inmoo and Megginson, William L., Do Privatization IPOs Outperform in the Long-Run? (July 12, 2008). Available at SSRN: or

Seung-Doo Choi

Dongeui University - School of Business ( email )

Busan, Busan

Inmoo Lee

KAIST College of Business ( email )

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

William L. Megginson (Contact Author)

University of Oklahoma ( email )

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


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