Performance of emerging and nonemerging industry initial public offerings
Document Type
Article
Publication Date
1-2015
Abstract
IPO underpricing is one anomaly in the finance literature widely observed across different stock markets. The purpose of this study was to test aftermarket performance up to one year for samples of US emerging and non-emerging industry initial public offerings (IPOs). According to previous research, on average most IPOs are underpriced due to investor uncertainty about firm performance. It follows that the level of investor uncertainty for emerging industry firm performance would be greater than for the well established nonemerging IPOs. This study examines how the randomly selected sample of IPOs from 1996-2012 performed on days 1,5, 30, 100, 180, and 1 year after the firm goes public. Unlike previous studies this work controls for the effect of hot vs. cold markets. Using the S&P 500 to adjust for risk this study analyzed a randomly selected sample of 40 firms (20 emerging and 20 nonemerging) to test for evidence of underpricing performance variation of emerging and nonemerging IPOs from 1996-2012. This study found that underpricing in the emerging industry IPOs significantly exceeded the non-emerging industry IPOs in all holding periods up to one year after the firms went public. The greatest variation in return occurred in the one day and one year holding periods.
Recommended Citation
Bacon, F. W., Akorful, A. (2015). Performance of Emerging and Non-Emerging Industry Initial Public Offerings. Academy of Accounting and Financial Studies Journal, 21(1), 37-44. http://www.alliedacademies.org
