scholarly journals Explanatory Power of Pre-Issue Financial Strength for Long-Term Market Performance: Evidence From Initial Equity Offerings on an Emerging Market

2019 ◽  
Vol 7 (1) ◽  
pp. 16
Author(s):  
Leszek Czapiewski ◽  
Joanna Lizińska
Keyword(s):  
Initial Public Offerings ◽  
Factor Model ◽  
Emerging Market ◽  
Explanatory Power ◽  
Equity Offerings ◽  
Calendar Time ◽  
Developed Country ◽  
Public Offerings ◽  
Long Run

This study tests possible sources of long-term risk-adjusted returns on initial public offerings (IPO) in Poland under the calendar-time portfolio (CTP) approach. The moment of going public still remains a puzzle in many areas. Poland’s status as an emerging market has been indisputable for many years, though improvements in capital market infrastructure have led to its recent reclassification as a developed country. It is an important European equity market. Thus, research on IPO pricing explanation for Poland is important for both investors and academics. In this study, we estimate risk premiums and run regressions on four asset pricing models, including the latest innovation, which is the Fama-French 5-factor model. We also check the robustness. The research documents the existence of the long-run underperformance for Polish IPOs independently of the specification of the calendar-time portfolio approach as alphas range from -9.6% to -13.2% annually. We show that the underperformance is mainly driven by IPOs in a position of weak pre-issue financial health. More profitable IPOs experience less negative long-term returns and the underperformance is even absent in some specifications.

scholarly journals Towards Economic Corporate Sustainability in Reporting: What Does Earnings Management around Equity Offerings Mean for Long-Term Performance?

2018 ◽  
Vol 10 (12) ◽  
pp. 4349 ◽  
Author(s):  
Joanna Lizińska ◽  
Leszek Czapiewski
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Emerging Market ◽  
Corporate Sustainability ◽  
Equity Offerings ◽  
Public Companies ◽  
Public Firms ◽  
Public Offerings ◽  
Earning Quality

Companies are very important contributors to the long-term sustainable wealth of economies and society. Public companies are likely to be especially important for economic, environmental, and social development. That is why we focus on initial public offerings (IPO). Responsible external reporting relates to the long-term value of companies and influences perceptions of value by stakeholders. This study contributes to the literature not only because it concentrates on earning quality in terms of going public, but it also combines it with another market puzzle, namely, long-term value. Previous conclusions for other markets should not simply be generalized for Poland, as the country has been an emerging market with many public firms controlled by insiders, with a limited role for the equity market and quite considerable bank financing. Using a unique dataset, we find positive and significant discretionary accruals in the IPO year, which may be perceived as a sign of poor earning quality. We also show that these accruals are negatively correlated with subsequent long-term market value for IPOs made before the financial crisis. The general conclusions are robust with respect to the latest innovations in proxies for earnings management, and also to a variety of alternative specifications.

scholarly journals INVESTIGATION TOWARDS THE LONG-RUN PERFORMANCE OF INITIAL PUBLIC OFFERINGS: EVIDENCE FROM INDONESIAN CAPITAL MARKET

2010 ◽  
Vol 2 (2) ◽  
pp. 100-125
Author(s):  
Lioniva Emasari ◽  
Dewi Tamara
Keyword(s):  
Initial Public Offerings ◽  
Abnormal Return ◽  
Mining Industry ◽  
Cumulative Abnormal Return ◽  
Public Offerings ◽  
Basic Industry ◽  
Long Run ◽  
Long Term Performance ◽  
Term Performance

We study the long-term performance of IPO share issued in Indonesia during the 1996-2001 periods. The IPOs in this period are mostly concentrated in Finance, Trade, Property and Basic Industry & Chemicals. The cumulative abnormal return (CAR) and buy-and-hold abnormal return (BHAR) in the third year are 15.83% and negative 68.02%, respectively. The CAR and BHAR in the fifth year are negative 1% and negative 139.7%, respectively. The highest CAR for 3 and 5 years are mining industry, with 289.29% and 226.80%, respectively. The lowest CAR for third year is trade, service & investment industry, with negative 59.36% and fifth year is agriculture with negative 59.72%. The lowest BHAR for third and fifth year is trade, service and investment industry with negative 113.01% and negative 230.99 respectively. The long-run performance using cumulative abnormal return is similar with the market and cannot outperform the market.  

scholarly journals The Aftermarket Performance of Initial Public Offerings in Pakistan

2016 ◽  
Vol 21 (1) ◽  
pp. 23-68
Author(s):  
Muhammad Zubair Mumtaz ◽  
Zachary A. Smith ◽  
Ather Maqsood Ahmed
Keyword(s):  
Initial Public Offerings ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Activity Period ◽  
Risk Level ◽  
Public Offerings ◽  
Explanatory Variables ◽  
Market Sentiment ◽  
Long Run

This paper estimates the aftermarket performance of initial public offerings (IPOs) listed on the Karachi Stock Exchange. The evidence confirms that IPOs generate statistically significant abnormal returns in the short run, which indicates that underwriters initially underprice IPOs when analyzed using a short time horizon. However, when using longer time horizons to estimate abnormal performance, the results indicate that IPOs underperform in the long-run. There is an apparent dislocation between the initial valuation set by underwriters and the premium paid by the market for these new issues. The market sentiment that causes this temporary disequilibrium eventually fades and the market reprices the newly issued shares. We conduct an extreme bounds analysis to test the sensitivity and robustness of 16 explanatory variables in determining the long-term performance of unseasoned newly issued shares. The results indicate that the long-term investment ratio, industry affiliation, market-adjusted abnormal returns, financial leverage, return on assets, IPO activity period, the aftermarket risk level of unseasoned issues, and the post-issue promoter’s holdings variables significantly affect IPOs’ aftermarket performance. Theoretically, the overreaction hypothesis, ex-ante uncertainty hypothesis and window-of-opportunity hypothesis best explain IPOs’ aftermarket performance in this study.

scholarly journals Bookbuilding e Alocação Estratégica: Evidência do Mercado Brasileiro de Ações

2006 ◽  
Vol 4 (1) ◽  
pp. 33
Author(s):  
Richard Saito ◽  
José André C. M. Pereira
Keyword(s):  
Initial Public Offerings ◽  
Strong Evidence ◽  
Seasoned Equity Offerings ◽  
Secondary Market ◽  
Discretionary Power ◽  
Equity Offerings ◽  
Investment Bank ◽  
Public Offerings ◽  
Allocation Criteria

We examine four bookbuilding processes on the Brazilian stock market executed by an investment bank from 2003 to 2004. In a bookbuilding process, the investment bank has the discretionary power in pricing and in allocating shares to investors. We analyze the allocation determinants and we find empirical evidence that bookbuilding does induce investors to disclose superior information. However there is strong evidence that issues related to majority controlling position, liquidity on secondary market, and flipping activities impact on allocation criteria. We find differences between allocation determinants derived from (a) initial public offerings and (b) seasoned equity offerings, but in both cases there is a tendency to favor long term investors.

Underpricing in Initial Public Offerings: The Indian Evidence

1997 ◽  
Vol 22 (4) ◽  
pp. 17-30 ◽  
Author(s):  
T P Madhusoodanan ◽  
M Thiripalraju
Keyword(s):  
Initial Public Offerings ◽  
Stock Markets ◽  
Short Term ◽  
Public Offerings ◽  
Long Run ◽  
The Impact

Underpricing in the initial public offerings (IPOs) is a well documented phenomenon in the stock markets. In this paper T P Madhusoodanan and M Thiripalraju analyse the Indian IPO market for the short-term as well as long-term underpricing. They also examine the impact of the issue size on the extent of underpricing in these offerings and the performance of the merchant bankers in pricing these issues. The study indicates that, in general, the underpricing in the Indian IPOs in the shortrun was higher than the experiences of other countries. In the long-run too, Indian offerings have given high returns compared to negative returns reported from other countries. The study also reveals that none of the merchant bankers showed any better pricing capabilities.

scholarly journals Initial Public Offerings Short and Long Term Performance of MENA Countries

2018 ◽  
Vol 14 (10) ◽  
pp. 234
Author(s):  
Mohammad S. AlShiab
Keyword(s):  
Initial Public Offerings ◽  
Data Set ◽  
Public Offerings ◽  
Mena Countries ◽  
Long Run ◽  
Benchmark Portfolio ◽  
Short Run ◽  
Fundamental Value ◽  
Term Performance

This study examines a comprehensive set of 162 Middle East and North Africa (MENA) Initial Public Offerings (IPO’s) for the period 2001- 2015, considered the first and most comprehensive data set investigated to date. Results confirmed that IPO performances are mixed among MENA countries classified into three groups. The first group comprises countries whose IPOs over-performed the Benchmark portfolio over the short-run, but underperformed over the long-run. The second group comprises countries where IPOs underperformed the Benchmark portfolio over the following 60 months post-listing date where such underperformance became quite significant over the long-run in comparison to the short-run. The third group comprises countries whose IPOs experienced cyclical performance change from over-performance to under- performance and vice versa. Overall, the IPOs went through cycles of price corrections around the fundamental value over the long term when compared to the short term performance.

Tata Motors’ successful cross-border acquisition of Jaguar Land Rover: key take-aways

2016 ◽  
Vol 32 (9) ◽  
pp. 15-18
Author(s):  
Atul Arun Pathak
Keyword(s):  
Emerging Market ◽  
Core Competencies ◽  
Secondary Data ◽  
Short Term ◽  
Developed Country ◽  
Content Type ◽  
Cross Border ◽  
Long Run ◽  
Land Rover

Purpose This paper aims to focus on Tata Motors, an automobile company from an emerging market, and its successful acquisition of two global marquee car brands in Jaguar and Land Rover (JLR). It traces the evolution of JLR under the stewardship of Tata Motors over an eight-year long period and examines the strategic reasons for the success of the acquisition. Design/methodology/approach The paper approaches strategic issues in cross-border acquisitions using an illustration of a successful deal. It is based on statements of leaders and secondary data about the acquirer and acquired organizations. The paper explores the strategic challenges faced when emerging market firms carry out cross border acquisition deals. It recommends the short-term and long-term strategies that acquirers can follow to improve the chances of a successful acquisition. Findings Any acquisition is challenging. Cross-border acquisitions face greater challenges, especially if the acquirer is from an emerging market country while the target company is from a developed country. Success of the acquisition, especially over the long run, depends on both internal factors that are under the control of the acquirer’s management, as well as external environmental factors that it needs to address. Both patience and luck are required ingredients for success in such contexts. Practical implications While the general temptation in any acquisition is to extract synergies as quickly as possible, the Tata Motors’ acquisition of JLR is an exception. Tata Motors carefully handled short-term challenges and continued to invest in the core competencies of JLR and reaped benefits over the long run. It was also fortunate that a variety of factors in the external environment turned favorable for Tata Motors and JLR in the eight years since the deal took place. Social implications It concedes that during an M&A deal, the leaders of a seller organization may be nervous about their future. JLR trade union leaders were initially not sure whether jobs in UK would remain secure. To ensure success of the deal, the leaders of the acquirer firm need to balance the interests of multiple stakeholders, both in the short-term, as well as over a longer-term perspective. Originality/value The paper considers the Tata Motors’ acquisition of JLR. It is an example of a large, difficult cross-border acquisition by an emerging market based company. While the acquisition proved difficult in the short term, it has yielded excellent dividends to the parent company over the long term. This paper explores the reasons why this cross-border acquisition succeeded and recommends strategies that other companies considering cross-border acquisitions can consider to improve their chances of success.

Do Institutions Receive Favorable Allocations in IPOs with Better Long-Run Returns?

2006 ◽  
Vol 41 (4) ◽  
pp. 809-828 ◽  
Author(s):  
Beatrice Boehmer ◽  
Ekkehart Boehmer ◽  
Raymond P. H. Fishe
Keyword(s):  
Initial Public Offerings ◽  
Private Information ◽  
Price Stabilization ◽  
Public Offerings ◽  
Long Run ◽  
Retail Investors ◽  
Long Term Performance ◽  
Term Performance

AbstractWe analyze allocations to institutional and retail investors in 441 initial public offerings (IPOs). In addition to the well-known favorable first-day returns, we show that institutions also obtain more allocations in IPOs with better long-term performance. We find that initial institutional flips help predict future returns, suggesting that at least some institutions retain valuable private information about IPO firms. Collectively, these findings illustrate the importance of aftermarket relations between underwriters and investors and that underwriters have discretionary means to compensate IPO investors beyond first-day returns and price stabilization.

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