Abnormal returns in privatization public offerings: the case of Portuguese firms

Resumo

This paper provides evidence on abnormal returns of Portuguese privatization public offerings for the period from 1989 to 2001. This study explores the abnormal performance of a comprehensive sample of Portuguese privatization transactions and investigates the determinants of the observed price behavior. We find some evidence of the underpricing phenomenon for privatized offerings but initial returns are low and barely significant. The results show further that privatization IPOs underperform private sector IPOs. In the long run, we observe negative abnormal returns. While in early event months, privatization public offerings yield more negative returns than private sector offerings, this effect is reversed in longer horizon periods. Initial underpricing is thus partially reversed and investors seem to require higher returns in partial privatizations.