Conversions of Mutual Savings Institutions

Do Initial Returns From These IPOS Provide Investors With Windfall Profits?

Authors

  • Julie A.B. Cagle Assistant Professor of Finance, College of Business Administration, Xavier University, Cincinnati, OH 45207
  • Gary E. Porter Assistant Professor of Finance, College of Business Administration, University of Central Florida, Orlando, FL 32816

DOI:

https://doi.org/10.1016/S1057-0810(97)90024-X

Abstract

We examine initial returns offidly underwritten IPOs of converting thrifts for evidence that managers and depositors of conversion-related offers earn significantly greater returns than investors in IPOs of otherfinancial institutions. Regulators have suggested that new guidelines for conversion from a mutual to a stock thrift are designed to curb “windfall profits” earned by insiders investing in conversion-related IPOs. While there are reports of average initial returns of more than 20% for conversion-related IPOs, our results suggest that investors earn average initial returns of about 7%, which is not significantly different than returns from IPOs of other thrifts and commercial banks,

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Published

1997-06-30

Issue

Vol. 6 No. 2 (1997): Financial Services Review

Section

New Original Submission

License

Copyright (c) 1997 JAI Press Inc.

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How to Cite

Conversions of Mutual Savings Institutions: Do Initial Returns From These IPOS Provide Investors With Windfall Profits?. (1997). Financial Services Review, 6(2), 141-150. https://doi.org/10.1016/S1057-0810(97)90024-X