This article compares the initial returns of privatization initial public offerings (IPOs) to those of privately-owned enterprises and investigates the determinants of short-run performance of privatization IPOs, using a sample of 185 privatization IPOs from 30 countries over the period from 1981 to 1997. The evidence indicates that there is a general tendency for privatizations to be underpriced to a greater degree than the initial public offerings of privatelyowned enterprises. In addition to comparing privatization IPOs to private IPOs, the cross-sectional determinants of privatization initial returns are analyzed. The empirical results strongly support the theoretical models of Perotti (1995) and Biais and Perotti (1997). The degree of underpricing at the initial public offering is positively related to the stake sold at initial public offerings and to the degree of uncertainty in ex ante value of newly-privatized firms (JEL G32).

"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 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." Copyright (c) 2010 Financial Management Association International.

This paper compares the long-run buy-and-hold returns of privatization initial public offerings (IPOs) to those of the domestic stock markets of respective countries using a sample of 241 privatization IPOs from 41 countries. The evidence indicates that the privatization IPOs significantly outperform their domestic stock markets if the returns are equally-weighted while value-weighted returns show a sharp reduction in performance. However, there are substantial variations in the long-run performance of privatization IPOs across industries, issuing countries, issue period, and the origin of commercial law of the country. This paper also analyzes the cross-sectional determinants of the long-run buy-and-hold returns of privatization shares. The results indicate that the long-run performance of privatization IPOs is significantly related to the proxies of policy uncertainty, consistent with the signaling models of Perotti (1995). Such effects appear to be overwhelming in the earlier post-IPO period, while the traditional market factors become more important as the policy uncertainty disappears over time. The institutional features of the country such as accounting standards, origin of commercial law, and corporate governance scheme also affect the return performance of privatization issues (JEL: G32).

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