International Journal of Financial Management

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

An Empirical Investigation of Short-Run Performance of Ipos in India


Affiliations
1 Lecturer, Delhi Institute of Advanced Studies, Rohini, Delhi, India
     

   Subscribe/Renew Journal


Initial Public Offering (IPO), is a way for companies to go public and meet its financing needs. IPOs are known to provide the initial abnormal returns to its investors. Therefore, this present paper is analyzing the short-run market adjusted performance of 100 IPOs listed on National Stock Exchange (NSE) from the period April 2008 to March 2011(3 years). This study found that Indian IPO market provides positive abnormal return to investors on short-run basis (1st and 7th day) like as observed in past literature. The returns diminished at the end of 30th day showing the negative return. The average market adjusted return for the 1st, 7th and 30th day is 7.23%, 2.09%, and -8.58% respectively. T-Statistic has been used to know the significance of these market adjusted returns. The wealth relative model has also been applied for analyzing the short run performance of IPOs, which provided the same results. The wealth relative index is 1.07, 1.02 and .91 for 1st, 7th and 30th day respectively. The performance of IPOs on yearly basis has also been presented. The results confirm that year 2009-10 showed exceptional performance; that investors can earn 7.03%, 6.44% and 4.21% average return if they sell these stocks at the end of 1st, 7th and 30th day respectively.

Keywords

IPO, NSE, Market Adjusted Return, Short-run Performance, Under-pricing
Subscription Login to verify subscription
User
Notifications
Font Size

  • Fei.,J., and Lawrence A. L. (2009), “The Impact on IPO Performance of Reforming IPO Allocation Regulations: An Event Study of Shanghai Stock Exchange A-Shares”, Working Paper, Department of Economics, Loughborough University

  • Gounopoulos, D. (2003), “The Initial Performance of IPOs: Evidence from Athens Stock Exchange”, Available at SSRN:http://ssrn.com/abstract=406702

  • Hasan, T., and Quayes S. (2008), “Under-pricing of initial public offerings in Bangladesh”, Applied Financial Economics, 4, 5–8

  • Jones, S., L., Megginson & et. al. (1999), “Share Issue Privatisations as Financial Means to Political and Economic Ends”, Journal of Financial Economics, 53, 217-253

  • Kakati, M. (1999), “Price Performance of Initial Public Offerings”, International Journal of Development Banking, Vol. 17, 59-75

  • Kumar, S. (2007), “An Analysis of IPOs Under pricing In Mauritius”, African Journal of Accounting, Economics, Finance and Banking Research, Vol. 1, No. 1

  • Liu, L., and Li W. D. (2000), “Research on First Day’s Abnormal Returns of IPOs in China’s Securities Market”, China Accounting and Finance Review, Vol. 2, No. 4, 26-53

  • Li, L., and Hovey M. Corporate Governance, “IPO Underpricing and Long-Term Performance of listed firms in China”, Electronic copy available at: http://ssrn.com/abstract=1466636

  • Loughran, T, Ritter J. & et. al. (1994), “Initial public offerings: International insights”, Pacific-Basin Finance Journal, 2, 165 – 199

  • Loughran, T., and Ritter J. (2004), “Why has IPO underpricing changed over time?”, Financial Management, 33, 5-37

  • Madhossodanan, T.,P., and Thiripalraju M. (1997), “Underpricing in Initial Public Offerings: the Indian Evidence”, Vikalpa, Vol.22, No. 4

  • Purnanandam, A., and Swaminathan B. (2004). “Are IPOs really underpriced?”, Review of Financial Studies, 17, 811-848

  • Reilly, F., K., and Hatfield K. (1969), “Investor Experience with New Stock Issues”, Financial Analyst Journal, Vol.25, 73-80

  • Rock, K. (1986), “Why new issues are underpriced”, Journal of Financial Economics, 15, 187- 212

  • Shah, A. (1995), “The Indian IPO Market: Empirical Facts”. Technical report, Centre For Monitoring Indian Economy, Mumbai

  • Singh, P., and Kumar B. (2008), “Short Run and Long Run Dynamics of Initial Public Offerings: Evidence from India”, Working Paper Series, IIM Ahmadabad

  • Sohail, M., K., and Raheman A. (2010), “Examining the Short-run IPOs Performance in State of Economy: Normal, Boom & Recession”, International Research Journal of Finance and Economics, Issue 35


Abstract Views: 509

PDF Views: 0




  • An Empirical Investigation of Short-Run Performance of Ipos in India

Abstract Views: 509  |  PDF Views: 0

Authors

Himanshu Puri
Lecturer, Delhi Institute of Advanced Studies, Rohini, Delhi, India

Abstract


Initial Public Offering (IPO), is a way for companies to go public and meet its financing needs. IPOs are known to provide the initial abnormal returns to its investors. Therefore, this present paper is analyzing the short-run market adjusted performance of 100 IPOs listed on National Stock Exchange (NSE) from the period April 2008 to March 2011(3 years). This study found that Indian IPO market provides positive abnormal return to investors on short-run basis (1st and 7th day) like as observed in past literature. The returns diminished at the end of 30th day showing the negative return. The average market adjusted return for the 1st, 7th and 30th day is 7.23%, 2.09%, and -8.58% respectively. T-Statistic has been used to know the significance of these market adjusted returns. The wealth relative model has also been applied for analyzing the short run performance of IPOs, which provided the same results. The wealth relative index is 1.07, 1.02 and .91 for 1st, 7th and 30th day respectively. The performance of IPOs on yearly basis has also been presented. The results confirm that year 2009-10 showed exceptional performance; that investors can earn 7.03%, 6.44% and 4.21% average return if they sell these stocks at the end of 1st, 7th and 30th day respectively.

Keywords


IPO, NSE, Market Adjusted Return, Short-run Performance, Under-pricing

References