Short-run under-pricing and long-run performance of Initial Public Offerings: An International insight and the performance of the Athens Stock Exchange.

Abstract

This dissertation addresses the issue of short-run under-pricing, long-run under-performance and the hot issue market phenomenon. There are evidence from the international literature and the Greek stock market for the period from 2002 to 2016. The data have been collected from specialized financial websites, the Athens Stock Exchange and the database of the University of Macedonia. Concerning the short-run under-pricing phenomenon, we examine the performance for the first five days of a sample of 35 Initial Public Offerings conducted the period 2002-2006. The results refer to raw returns and adjusted returns that exclude the general Index performance. There are strong evidences that the short-run performance of our sample are in compliance with the international literature. The first day raw return has been measured to 7.16% whereas the adjusted return to 7.40%. The fifth day the raw return is 3.13% and the adjusted return 3.93%, less than the first day performance but still positive. As for the long-run performance we tested the cumulative performance for monthly returns till the 60th month (five year period). We illustrate the statistics for a set of predetermined dates according to the international literature and other studies regarding the Greek stock market in order to draw more coherent conclusions. Our study suggests that the IPOs after the positive performance of the first three months turn to negative performances till the end of the five year period under consideration. In particular these results concern the cumulative adjusted returns which have a negative performance of 5.97% at the end of the first year and a peak of negative performance (39.89%) at the end of the fifth year. The raw returns seem to perform better than the adjusted and occasionally have positive performance (fifth year returns) but this in fact incorporates the momentum of the General Index that have to be excluded. As for the hot issue market phenomenon the evidence of the Athens stock exchange are in compliance with the international evidence as well. Finally the entire statistical test has been contacted for a significance level of 10% and in some test a level of 5% is also accepted.