| Summary: | This study examines privatization of state-owned enterprises through
initial public offerings (IPOs) of common stock. The focus is on the short-run and
long-run stock performance of state-owned enterprises initial public offerings.
The well-known pattern associated with the state-owned enterprises IPOs is the
frequent occurrence of large short-run returns and positive long-run return. Based
on a sample of 14 state-owned enterprises IPOs in 1991-2007, this study found
that in the short-run, the mean total excess return and the wealth relative was
14.93% and 1.14 respectively. Those positive mean excess return and the wealth
relative above one implies that IPOs outperformed the market in that period but
insignificant at the .05 level.
In the long-run, consistent with previous results, in this study the mean
excess return of 35.93% for an investor who bought at the offering price and held
for three years is significantly different from zero. Furthermore, the wealth
relative of 1.27 implies that Indonesian state-owned enterprises IPOs
outperformed the market in the long-run. The t-statistic of 1.843 is significant so
there is sufficient evidence to conclude that in the long-run the stock performance
of the state-owned enterprises outperform the market. Firm sizes, age of the
company and short-run performance have a positive effect on the performance of
IPOs.
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