Long-run performance of privatized government monopolies: Australian experience

This paper considers the post-listing returns performance of government-issued Initial Public Offerings (IPOs) in Australia during the period 1989 to 1998. While several studies have considered the performance of government IPOs, most of their attention has been focused on the immediate return performance. Little analysis has been undertaken on the longer-term performance of government IPOs. It is found in this paper that government IPOs, considered as a whole, are no more underpriced than non-government IPOs. However, when IPOs involving government monopolies are considered separately from other government IPOs, it appears that their returns are less than those of nongovernment IPOs initially but that these returns rapidly rise giving government IPOs a better long-term return than non-government IPOs. It is proposed that this pattern of returns could reflect the allocation process that favors retail investors to the disadvantage of institutional investors. JEL Classification: G12, G14, G28, G34 Keywords: Initial Public Offerings; Retail and Institutional Investors: Privatisation; State owned monopolies