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The Market Performance of Initial Public Offerings in the Istanbul Stock Exchange

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  • Recep Bildik
  • Mustafa K. Yilmaz

Abstract

This study examines the long-standing IPO performance in the Istanbul Stock Exchange (ISE) by using new factors such as source of shares (new issue or sale of large shareholders), allocation of shares and dispersion of investors as well as existing factors such as market conditions (hot/cold), underwriters’ reputation, and firm characteristics (firm size, E/P, and B/M ratios) in the period of 1990-2000. Our results differ from the previous studies at least three ways. First, the magnitude of underpricing is significantly lower, while underperformance is higher than those of in other studies. Our strong evidence supports the existence of the underpricing by positive initial excess returns (5.94%) and the long-term underperformance up to three-year holding period (-84.5%) in the ISE. Second, underperformance starts much earlier than in other markets i.e. at the end of first month following the IPO because of myopic behavior of investors seeking short-term returns. Third, the underperformance disappears for IPOs made in a cold market, and those made through the sale of large shareholders. Allocation of shares in an IPO and firm size also impact after-market performance of shares

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Bibliographic Info

Article provided by Banking Regulation and Supervision Agency in its journal Journal of Banking and Financial Markets.

Volume (Year): 2 (2008)
Issue (Month): 2 ()
Pages: 49-76

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Handle: RePEc:bdd:journl:v:2:y:2008:i:2:p:49-76

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Related research

Keywords: Initial Public Offerings; Underperformance; Underpricing; Market Efficiency; Emerging Markets;

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References

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  1. Yasushi Hamao & Frank Packer & Jay Ritter, 1998. "Institutional affiliation and the role of venture capital: evidence from initial public offerings in Japan," Research Paper 9807, Federal Reserve Bank of New York.
  2. Loughran, Tim & Ritter, Jay R. & Rydqvist, Kristian, 1995. "Initial public offerings: International insights," Pacific-Basin Finance Journal, Elsevier, vol. 3(1), pages 139-140, May.
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  17. Richard Stehle & Olaf Ehrhardt & René Przyborowsky, 2000. "Long-run stock performance of German initial public offerings and seasoned equity issues," European Financial Management, European Financial Management Association, vol. 6(2), pages 173-196.
  18. Hanley, Kathleen Weiss, 1993. "The underpricing of initial public offerings and the partial adjustment phenomenon," Journal of Financial Economics, Elsevier, vol. 34(2), pages 231-250, October.
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