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The abnormal returns of UK privatisations: from underpricing tooutperformance

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  • Massimo Florio
  • Katiuscia Manzoni

Abstract

This paper offers a review and discussion of the evidence concerning the underpricing and long run performance of British PIPOs (Privatisation Initial Public Offerings) between 1977-1996, i. e. from the first privatisation under a Labour Government (British Petroleum), until the last ones by a Conservative Government (Railtrack). We exclude more recent years because the change of government, the introduction of a windfall tax on excess profits of regulated utilities, and changes in the regulatory regime, mark a totally different landscape as compared with the previous twenty years. We find evidence that underpricing was not followed by underperformance, as is usually observed with IPOs, but rather strong outperformance. We decompose this trend by subgroups within a 55 observations sample, and conclude that lax regulation was probably the main driving force between abnormal returns of British PIPOs.

Suggested Citation

  • Massimo Florio & Katiuscia Manzoni, 2002. "The abnormal returns of UK privatisations: from underpricing tooutperformance," Departmental Working Papers 2002-23, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2002-23
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    References listed on IDEAS

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    1. Perotti, Enrico C. & van Oijen, Pieter, 2001. "Privatization, political risk and stock market development in emerging economies," Journal of International Money and Finance, Elsevier, vol. 20(1), pages 43-69, February.
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    4. Qi Huang & Richard M. Levich, 1999. "Underpricing of New Equity Offerings by Privatized Firms: An International Test," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-075, New York University, Leonard N. Stern School of Business-.
    5. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, April.
    6. Jones, Steven L. & Megginson, William L. & Nash, Robert C. & Netter, Jeffry M., 1999. "Share issue privatizations as financial means to political and economic ends," Journal of Financial Economics, Elsevier, vol. 53(2), pages 217-253, August.
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    Cited by:

    1. Bruno Viani, 2011. "Can Governments signal commitment in privatization sales?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 197(2), pages 87-110, June.
    2. Haykel Hamdi & Duc Khuong Nguyen & Hassan Obeid, 2014. "The short- and long-term performance of privatization initial public offerings in Europe," Working Papers 2014-241, Department of Research, Ipag Business School.
    3. Jupe, Robert, 2012. "The privatization of British Energy: Risk transfer and the state," Accounting, Organizations and Society, Elsevier, vol. 37(2), pages 116-129.
    4. Au Yong, Hue Hwa & Laing, Elaine, 2021. "Stock market reaction to COVID-19: Evidence from U.S. Firms’ International exposure," International Review of Financial Analysis, Elsevier, vol. 76(C).
    5. Emanuele Bacchiocchi & Massimo Florio, 2008. "Privatisation and aggregate output: testing for macroeconomic transmission channels," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(5), pages 525-545, December.
    6. Massimo Florio, 2009. "The American Crisis: Travel Notes," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, May.
    7. Del Bo, Chiara D. & Ferraris, Matteo & Florio, Massimo, 2017. "Governments in the market for corporate control: Evidence from M&A deals involving state-owned enterprises," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 89-109.

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    More about this item

    Keywords

    Privatisation; regulation; abnormal returns;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

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