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Underpricing Of New Equity Offerings By Privatized Firms: An International Test

Author

Listed:
  • QI HUANG

    (Department of Banking and Finance, Hofstra University, 221 Weller Hall, Hempstead, NY 11550, USA)

  • RICHARD M. LEVICH

    (Stern School of Business, New York University, 44 W. 4th Street, New York, NY 10012, USA)

Abstract

In this paper, we study a large sample of 507 privatization offerings from 39 countries over the period 1979–1996. Our objectives are twofold. First, we document the extent of short-run underpricing of these privatization offerings and measure their variation across countries, industries, and years, as well as drawing comparisons to private company IPOs. Second, we test alternative explanations of the determinants of short-run underpricing drawing on various models of maximizing behavior by underwriters, augmented by variables that proxy for national political objectives. Overall, we find support for elements of asymmetric information theory, investor sentiment theory and the reputation building hypothesis. With the exception of the Gini coefficient, our political proxy variables are typically not significant. Thus to a significant degree, the investment banking strategies believed to characterize IPOs of private companies in industrial countries may also play a role in the IPO strategies of state-owned-enterprises in both industrial and lesser developed economies.

Suggested Citation

  • Qi Huang & Richard M. Levich, 2003. "Underpricing Of New Equity Offerings By Privatized Firms: An International Test," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-30.
  • Handle: RePEc:wsi:ijtafx:v:06:y:2003:i:01:n:s021902490300175x
    DOI: 10.1142/S021902490300175X
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    Cited by:

    1. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    2. Saeed Md. Abdullah & Simon Zaby, 2021. "Seasoned Equity Offerings and Differences in Share-Price Impact by Firm Categories," IJFS, MDPI, vol. 9(3), pages 1-10, July.
    3. Henna Malik & Malik Muhammad Shehr Yar & Attiya Yasmin Javid, 2017. "New Issues Puzzle: Experience from Karachi Stock Exchange," Working Papers id:12182, eSocialSciences.

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