Ownership Structure and Initial Public Offerings in Small Economies - the Case of Portugal –

This study aims to answer to three different questions. First, whether we could observe the short-term abnormal return anomaly or the long-term underperformance in the IPOs of a small economy. Second, if these anomalies exist, whether they are distinct when ownership categories (private versus state owned) are compared. And third, if these categories show different patterns, i. e., whether private placements show a significantly different under / overpricing phenomena than placements made by state owned companies. In order to do so, we selected the Portuguese market testing whether cumulative abnormal returns (CARs) or the wealth relative (WR) of a set of portfolios were statistically and significantly different from zero. We found significant short-term abnormal returns either for IPOs placed by private firms either for IPOs placed by state owned firms. In addition, state owned IPOs have been more profitable for short term investments than private IPOs. Secondly, we observed weak signs for one-year time period underperformance, but we found new evidences, as reported in the literature, for significant differences for a oneyear performance according to the ownership structure. As opposed to our expectations derived from the literature on economic and financial performance of privatised firms, we found that IPOs placed by private companies tend to perform better in a one-year term than IPOs placed by state owned firms. However, our results seem to be quite sensitive to the methodology under use.