Why Does Underperformance of IPOs in the Long-Run Become Debatable? A Theoretical Review (original) (raw)
Related papers
On the long-run performance of IPOs
1999
We propose that the long-run performance of IPOs is a function of pre-IPO factors, including managerial decisions and the firm's performance prior to going public. We relate long-run performance to a much richer set of explanatory factors than in the previous literature. Using a number of variables, we provide empirical evidence in support of this proposition. The manner in which a company is run before it is listed on the stock exchange gives a strong signal of how its shares will perform in its first few years of coming to the market. Using a UK data set, we find that the percentage of equity issued and the degree of multinationality are key predictors of IPO performance.
The long-run underperformance of initial public offerings: A methodological problem?
Revista de Economía Aplicada, 2005
El objetivo de este estudio es analizar el comportamiento a largo plazo de las OPIs realizadas en el mercado español de capitales. Dado que el método de cálculo del rendimiento influye tanto en la magnitud del rendimiento anormal, como en el tamaño y potencia de los tests estadísticos, hemos utilizado diferentes métodos, con el objeto de examinar la robustez del comportamiento a largo plazo de las OPIs con respecto a varias especificaciones del modelo. Los resultados del estudio muestran que la existencia de bajo rendimiento a largo plazo para las OPIs españolas depende de la metodología utilizada. Así, existe bajo rendimiento a largo plazo cuando se utilizan rentabilidades equiponderadas de comprar y mantener, aunque depende del test estadístico considerado, y no cuando se utilizan carteras calendario o rentabilidades de comprar y mantener ponderadas por capitalización. Palabras clave: oferta pública inicial (OPI), rentabilidad a largo plazo, BHAR, carteras calendario. Clasificación JEL: G10, G12 y G14. S tudies that have analysed firms going public have revealed, with more or less homogeneity, the existence of two anomalies: underpricing and long-run underperformance. This paper focuses on the second of these namely, that investors seem to obtain losses due to holding shares of the firms that have recently carried out an IPO, compared to those firms that have not done so ]. Recently, papers such as Barber
International journal of business and economics, 2014
This paper investigates the performance of Jordanian IPO’s using data from Amman Stock Exchange (ASE) over the period 1981-2002. We studied the sensitivity of the model used to estimate the cumulative average abnormal returns. In doing that, we employed three different models and used two approaches to test the result: Standard event-time analysis and the calendar-time approach. The three models used to estimate the cumulative average abnormal returns produce significant negative abnormal returns when we employ event-time analysis. However, the calendartime approach concludes that the long-term performance of Jordanian IPO’s is not different than that of the overall market.
IPO Stocks Performance Imperfection: A Review of Models and Empirical Works
American Journal of Industrial and Business Management, 2014
Performance of IPO stocks is determined by the returns on a firm's IPOs and other subsequent issues. Returns are derived from the price swings (volatility) as compared to the offer price so that a favourable swing indicates favourable returns and vice-versa. In the light of this, we review models and empirical works that try to explain these swings and their consequence on the IPOs performance to hypothesize that IPO stocks performance swing (return volatility) is inevitable as far as a real efficient market cannot exist except in a world of utopia. Evidences from the previous studies show that one reason or the other must be achieved or committed to get the IPO stocks marketed at the instance of the issue which subsequently keep influencing the same stocks even in the secondary market over a very long period of time even though at a minimum volatile rate but not completely eliminated. This is what we regard as stocks performance imperfection.
Short-Run and Long-Run Performance of IPOs: Evidence from Taiwan Stock Market
Journal of Finance and Accounting, 2013
This paper studies the aftermarket stock performance of IPOs in short-run and long-run, and examines whether the long-run underperformance exists in Taiwan stock market. This paper applies the measure of expected skewness to verify that the highly expected skewed IPO firms are overpriced and experience the long-run underperformance. We find that IPO firms are underpriced 48.54% and severely underperform from three to five years in comparison to the reference portfolios. Skewness is reported to be positively related with the underpricing level of the first day. However, our findings suggest that this skewness measure can't explain for the long-run phenomenon of IPOs.
Pattern and Determinants of Long–Run Performance of IPOs in India
The scope of the present study is to find out how far the publicly available information 1 is being used by the IPO firms and IPO investors. The models designed in the study all are based on publicly available information. The study period is from the year 2004 to 2013. It is based on a sample of 200 IPOs issued during the study period. The objectives of the study are: to see the relationship between long run and short run returns of IPOs and find out the determinants of long run returns of IPOs.
Performance of IPO stocks is determined by the returns on a firm’s IPOs and other subsequent issues. Returns are derived from the price swings (volatility) as compared to the offer price so that a favourable swing indicates favourable returns and vice-versa. In the light of this, we review models and empirical works that try to explain these swings and their consequence on the IPOs performance to hypothesize that IPO stocks performance swing (return volatility) is inevitable as far as a real efficient market cannot exist except in a world of utopia. Evidences from the previous studies show that one reason or the other must be achieved or committed to get the IPO stocks marketed at the instance of the issue which subsequently keep influencing the same stocks even in the secondary market over a very long period of time even though at a minimum volatile rate but not completely eliminated. This is what we regard as stocks performance imperfection.
On the Long-Run Performance of IPOs: The Effect of Pre-IPO Management Decisions
1999
Abstract: We propose that the long-run performance of IPOs is a function of pre-IPO factors, including managerial decisions and the firm's performance prior to going public. We relate long-run performance to a much richer set of explanatory factors than in the previous literature. Using a number of variables, we provide empirical evidence in support of this proposition. The manner in which a company is run before it is listed on the stock exchange gives a strong signal of how its shares will perform in its first few years of coming to the ...
Long-run performance of initial public offerings (IPOs) in the Spanish capital market
Available at SSRN 274086, 2001
Academic research into firms that have gone public has been focused on the study of two anomalies: initial underpricing and long-run underperformance. The first aim of this study is to analyse all the Spanish Initial Public Offerings(IPOs) during the period 1987-1997, with a sample consisting of 56 firms, in order to provide additional evidence on the long-run performance of IPOs. Nevertheless, since several works have reported the existence of a relationship between the two anomalies of the IPOs -shortrun underpricing and long-run underperformance-we have also analysed the initial returns of the IPOs.