Privatisation initial public offerings in Malaysia: initial premium and long-term performance

K. Paudyal, B. Saadouni, R.J. Briston

Research output: Contribution to journalArticle

76 Citations (Scopus)

Abstract

This study addresses four major issues related to privatisation initial public offers (PIPOs) and other initial public offers (IPOs) in Malaysia. First, an analysis of initial excess returns suggests that, on average, Malaysian IPOs are underpriced and PIPOs offer significantly higher initial returns than other IPOs. Second, regression based analysis reveals that over-subscription, market volatility, proportion of shares sold, underwriters reputation, and ex ante risk together explain over three-quarters of the variation in the excess returns offered by Malaysian PIPOs. However, this model can only explain 10% and 36% of other IPOs and the whole sample respectively. Third, the analysis of secondary market performance suggests that neither PIPOs nor other IPOs significantly outperform/ underperform the market over three years. Further analysis reveals that the IPOs with higher initial return underperform the market while those with low initial return outperform. Finally, the paper confirms that IPOs underwritten by reputed underwriters are significantly better long-term investments as compared to the IPOs underwritten by less reputed underwriters.

LanguageEnglish
Pages427-451
Number of pages25
JournalPacific Basin Finance Journal
Volume6
Issue number5
DOIs
Publication statusPublished - 30 Nov 1998

Fingerprint

Initial public offerings
Long-term performance
Privatization
Malaysia
Premium
Excess returns
Underwriters
Secondary market
Market performance
Underwriter reputation
Subscription
Market volatility
Proportion

Keywords

  • G12
  • G32
  • IPO
  • long-term performance
  • Malaysia
  • privatization
  • underwriters reputation

Cite this

@article{bb8547fd2e4b40fbacc44734053b9626,
title = "Privatisation initial public offerings in Malaysia: initial premium and long-term performance",
abstract = "This study addresses four major issues related to privatisation initial public offers (PIPOs) and other initial public offers (IPOs) in Malaysia. First, an analysis of initial excess returns suggests that, on average, Malaysian IPOs are underpriced and PIPOs offer significantly higher initial returns than other IPOs. Second, regression based analysis reveals that over-subscription, market volatility, proportion of shares sold, underwriters reputation, and ex ante risk together explain over three-quarters of the variation in the excess returns offered by Malaysian PIPOs. However, this model can only explain 10{\%} and 36{\%} of other IPOs and the whole sample respectively. Third, the analysis of secondary market performance suggests that neither PIPOs nor other IPOs significantly outperform/ underperform the market over three years. Further analysis reveals that the IPOs with higher initial return underperform the market while those with low initial return outperform. Finally, the paper confirms that IPOs underwritten by reputed underwriters are significantly better long-term investments as compared to the IPOs underwritten by less reputed underwriters.",
keywords = "G12, G32, IPO, long-term performance, Malaysia, privatization, underwriters reputation",
author = "K. Paudyal and B. Saadouni and R.J. Briston",
year = "1998",
month = "11",
day = "30",
doi = "10.1016/S0927-538X(98)00018-3",
language = "English",
volume = "6",
pages = "427--451",
journal = "Pacific-Basin Finance Journal",
issn = "0927-538X",
number = "5",

}

Privatisation initial public offerings in Malaysia : initial premium and long-term performance. / Paudyal, K.; Saadouni, B.; Briston, R.J.

In: Pacific Basin Finance Journal, Vol. 6, No. 5, 30.11.1998, p. 427-451.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Privatisation initial public offerings in Malaysia

T2 - Pacific-Basin Finance Journal

AU - Paudyal, K.

AU - Saadouni, B.

AU - Briston, R.J.

PY - 1998/11/30

Y1 - 1998/11/30

N2 - This study addresses four major issues related to privatisation initial public offers (PIPOs) and other initial public offers (IPOs) in Malaysia. First, an analysis of initial excess returns suggests that, on average, Malaysian IPOs are underpriced and PIPOs offer significantly higher initial returns than other IPOs. Second, regression based analysis reveals that over-subscription, market volatility, proportion of shares sold, underwriters reputation, and ex ante risk together explain over three-quarters of the variation in the excess returns offered by Malaysian PIPOs. However, this model can only explain 10% and 36% of other IPOs and the whole sample respectively. Third, the analysis of secondary market performance suggests that neither PIPOs nor other IPOs significantly outperform/ underperform the market over three years. Further analysis reveals that the IPOs with higher initial return underperform the market while those with low initial return outperform. Finally, the paper confirms that IPOs underwritten by reputed underwriters are significantly better long-term investments as compared to the IPOs underwritten by less reputed underwriters.

AB - This study addresses four major issues related to privatisation initial public offers (PIPOs) and other initial public offers (IPOs) in Malaysia. First, an analysis of initial excess returns suggests that, on average, Malaysian IPOs are underpriced and PIPOs offer significantly higher initial returns than other IPOs. Second, regression based analysis reveals that over-subscription, market volatility, proportion of shares sold, underwriters reputation, and ex ante risk together explain over three-quarters of the variation in the excess returns offered by Malaysian PIPOs. However, this model can only explain 10% and 36% of other IPOs and the whole sample respectively. Third, the analysis of secondary market performance suggests that neither PIPOs nor other IPOs significantly outperform/ underperform the market over three years. Further analysis reveals that the IPOs with higher initial return underperform the market while those with low initial return outperform. Finally, the paper confirms that IPOs underwritten by reputed underwriters are significantly better long-term investments as compared to the IPOs underwritten by less reputed underwriters.

KW - G12

KW - G32

KW - IPO

KW - long-term performance

KW - Malaysia

KW - privatization

KW - underwriters reputation

UR - http://www.scopus.com/inward/record.url?scp=0011052654&partnerID=8YFLogxK

UR - https://www.sciencedirect.com/journal/pacific-basin-finance-journal

U2 - 10.1016/S0927-538X(98)00018-3

DO - 10.1016/S0927-538X(98)00018-3

M3 - Article

VL - 6

SP - 427

EP - 451

JO - Pacific-Basin Finance Journal

JF - Pacific-Basin Finance Journal

SN - 0927-538X

IS - 5

ER -