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Performance of Polish IPO Firms: Size and Profitability Effect

Listed author(s):
  • Joanna Lizińska
  • Leszek Czapiewski
Registered author(s):

    The study investigates the price behavior after initial public offerings (IPOs) listed on the Warsaw Stock Exchange from 2004 to 2009. It focuses on possible explanations for the IPO phenomenon within the context of Poland and provides evidence on the relation between both the company size and profitability and the aftermarket price performance. The study aims to answer three questions. First, whether we could observe the short-term underpricing and the long­ term underperformance of Polish IPOs, including the financial crisis period. Second, if the IPO anomalies did exist, whether they were distinct for the size and profitability subsamples. Finally, the change of the profitability was investigated for size subsamples from before to after going public.A lower level of the underpricing and three-year underperformance was reported in comparison to the previous WSE studies. The pre‐issue company size influences the IPO underpricing with the higher level of returns for smaller companies. Concerning the long-term performance, the opposite relation between size and buy‐and‐hold abnormal returns was found. It was also found that the higher the pre‐issue profitability, the higher the underpricing. Large companies experience a better profitability improvement in the pre‐IPO period with the profitability ratios getting worse not so rapidly after the flotation.

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    File URL: http://gospodarkanarodowa.sgh.waw.pl/p/gospodarka_narodowa_2014_01_03.pdf
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    Article provided by Warsaw School of Economics in its journal Gospodarka Narodowa.

    Volume (Year): (2014)
    Issue (Month): 1 ()
    Pages: 53-71

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    Handle: RePEc:sgh:gosnar:y:2014:i:1:p:53-71
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    1. Saurabh Ghosh, 2005. "Underpricing of Initial Public Offerings: The Indian Experience," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 41(6), pages 45-57, November.
    2. Roosenboom, Peter & van der Goot, Tjalling & Mertens, Gerard, 2003. "Earnings management and initial public offerings: Evidence from the Netherlands," The International Journal of Accounting, Elsevier, vol. 38(3), pages 243-266.
    3. Miller, Edward M, 1977. "Risk, Uncertainty, and Divergence of Opinion," Journal of Finance, American Finance Association, vol. 32(4), pages 1151-1168, September.
    4. Loughran, Tim & Ritter, Jay R, 1995. " The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
    5. Ljungqvist, Alexander P., 1997. "Pricing initial public offerings: Further evidence from Germany," European Economic Review, Elsevier, vol. 41(7), pages 1309-1320, July.
    6. John D. Lyon & Brad M. Barber & Chih-Ling Tsai, 1999. "Improved Methods for Tests of Long-Run Abnormal Stock Returns," Journal of Finance, American Finance Association, vol. 54(1), pages 165-201, 02.
    7. Wolfgang Aussenegg, 2000. "Privatization versus Private Sector Initial Public Offerings in Poland," Multinational Finance Journal, Multinational Finance Journal, vol. 4(1-2), pages 69-99, March-Jun.
    8. Rajan, Raghuram & Servaes, Henri, 1997. " Analyst Following of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 52(2), pages 507-529, June.
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