Long-run performance of public vs. Private sector initial public offerings in Pakistan

Abstract

This paper examines the long- and the short-run share price performance of industrial initial public offerings (IPOs) for Pakistan's market for the period from 2000 to 2006. In particular, it compares the stock price behaviour of privatisation IPOs and private sector IPOs in Pakistan. By analysing a sample of 35 industrial IPOs, it can be concluded that IPOs tend to outperform the market with a positive initial market-adjusted return of 36.48 percent. This initial under-pricing is consistent with the previous empirical studies on IPOs, which consistently find the IPO's excess returns in the short-run. The 2-year long-run aftermarket performance of all issues is negative (-23.68 percent), while it is not only positive (12.69 percent) but also very large for privatisation IPOs when compared to the private sector IPOs (-33.11 percent), even as both the values are not statistically significant. The long-run performance of the public sector IPOs has been remarkably better than the private sector IPOs in Pakistan's market. © The Pakistan Development Review.