Initial and Aftermarket Performance of Egyptian Share Issue Privatization

The phenomenon of under pricing initial public offerings is documented for 53 Egyptian share issue privatizations (SIPs) between 1994 and 1998. In the long run, I find mixed results. SIPs sustain their positive performance and provide investors with abnormal returns over a one-year period, however, over 3 and 5 year horizons, the results document negative abnormal returns. The initial excess returns are determined by ex-ante uncertainty and demand multiplier, while the aftermarket abnormal returns are dominated, mainly, by initial excess return and price-earning ratio, in addition to ex-ante uncertainty and demand multiplier. The empirical findings of this paper are consistent with the initial public offerings market in which investors are over optimistic towards the performance of these issues but grow more pessimistic over time.