International Journal of Financial Management

K. V. Bhanu Murthy ¹, Amit Kumar Singh ²

Affiliations
1 Department of Commerce, Delhi School of Economics, University of Delhi, New Delhi, IN
2 Department of Commerce, Shaheed Bhagat Singh College, University of Delhi, New Delhi, IN

Abstract

The main objective of this research paper is to examine the short run performance of IPOs by taking one-month performance. There exists a notion that the performance of IPO stocks has improved in the short run after going public. In this study, the data for short run analysis are taken for 30 days. We try to test the empirically the short run performance for a sample of 89 IPO firms that approached the market during the period 2006-09. We have calculated listing gain, short run gain, short run excess gain and Index growth.

We have used a logistic regression model to test the basic hypothesis, with the help of data on 89 IPOs, from the Indian stock market. The study uses prelisting information on which IPO pricing is based.

In this paper we have seen that many of the IPOs have significant returns on the day of listing but thereafter they do not give much return in the short-run, it shows that market overreacts to the initial public offers.

Keywords

Listing Gain, Short Run Gain, Determinants of Short Run Gain.

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K. V. Bhanu Murthy ¹, Amit Kumar Singh ², Lovleen Gupta ³

Affiliations
1 Department of Commerce, Delhi School of Economics, University of Delhi, IN
2 Department of Commerce, Shaheed Bhagat Singh College, University of Delhi, IN
3 Department of Commerce, Hindu College, University of Delhi, IN

Abstract

In this paper, we examine the Long-run performance of initial public offerings (IPOs). The data has been taken for 31 IPOs from the year 2000 to 2003. We have used Logistic Regression Model through SPSS Version 16 to test for the relationship between long run performance of IPOs and short run performance variables of the company. The analysis shows that the long run variables have no relationship with short-run variables or else have negative relationship. With some of the variables it has positive relationship. It shows anomaly. The companies having listing gain have negative current ratio, debt equity ratio and return on net worth and the companies having short-run gain has negative current ratio and debt equity ratio. The theory supports the view that for IPO markets to be efficient there should be low listing gain, moderate short-run gain and high long-run gain. Only then there will be long term development of IPO market. But the actual situation is opposite. The companies have listing gain, short-run gain but they are not able to give long run gain.

Keywords

IPO, Short-Run Performance, Long Run Performance.

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