The Effects of The Divesture of The First State-owned Bank through Stock Exchange on Daily Returns of Banks and Insurance Companies in Tehran Stock Exchange

The privatization policy in Iran flourished after the announcement of overall policies of the article 44 of the constitution. Based on enacted laws، it is determined that all public banks have to be divested to private sector excluding Melli and Sepah and specialized ones. Mellat bank was the first one entering Tehran Stock Exchange after passing the legal process. This research aims to investigate the effects of this share offering on daily returns of financial institution’s stocks existing in Tehran Stock Exchange so that can measure the investor’s attitude towards this policy and its application. The statistical population of this study consists of seven banks and three insurance companies in Tehran Stock Exchange for which their daily returns are analyzed during a period of 565 days since 5th of Day 1386 to 12th of Ordibehesht، 1389 (December 25 th، 2007 to May 2nd 2010). Two Panel Data are used to study all these seven banks and three insurance companies during the above-mentioned period. In order to estimate these panels، seemingly unrelated regression (SUR) method is employed regarding the events nature and violation of independent distribution of residuals. The results show that among seven events relating to Mellat bank’ share offering in Tehran Stock Exchange، there is no significant reaction from investors in six of them. Only، in the fifth event، relating to the four percent offering of this bank’ block، we observed a significant reduction in daily returns of private banks’ stocks in Tehran Stock Exchange. Also in seventh event، we observe a significant reduction in daily return of insurance companies stocks.