Long-Run Consequences of the Listing of Financial Institutions

This paper compares long-run cumulative abnormal returns of initial public offerings (IPO) in the financial industry using a sample of 44 privatized financial institution initial public offerings from 20 countries. This paper compares one three, and five year holding period returns of the financial institution IPOs to those of the domestic stock market indices and to those of size and size and book to market equity ratio(BM) matched firms of respective countries. Findings are in sharp contrast to the previous studies. IPOs from the financial industry insignificantly underperform their domestic stock markets in the long run. However, they do show more significant abnormal long term stock performance relative to their Fama French size or size and BM matched benchmark firms. The results in the paper suggest that previous results on the long-run stock performance of financial IPOs should be interpreted with caution.