Tenang, Zambri Mohamad
(1998)
The performance of initial public offer versus performance of privatised government companies.
PhD thesis, Universiti Sains Malaysia..
Abstract
The empirical evidence accumulated during recent years for almost every capital
market in the world suggested that initial public offering provide significant
abnormal return on their first day of trading.
This study, however, has three major objectives. First, to determine the general
trends of underpricing of IPO's from 1987 to 1997. This is because there is a
genet al fiend that IPO's has become popular among investors in Malaysia. The
second is to determine the possible factors that might have contributed to the level
<»r iKidcmiising. 'Ihiidly, to compile the general trends against privatised
governin' nt companies.
This study documents a mean annualised first day return of 10,560 percent Tor
privatised government companies, 241,793 percent for companies on the main
board, and 5,355,436 percent for second board companies. The oversubscription
ratio was 7.6 times for government companies, 33.9 times for main board
companies and 60.1 times for the second board companies.
The observation seems to indicate that the larger the size of a company , the lower
is its oversubscription ratio and the first day return on investment. The study also
indicates that the company opening price has a very strong relationship to the
subscription price of the stock, the gross price earning ratio based on subscription
price and the number of times it is oversubscribe.
The result of this study is consistent with the study done by Yong (1996) on IPO's
of Malaysian stock, and not consistent with the study done by Perotti (1993) on the
structure of privatisation plans.
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