Author:
Arora Nischay,Singh Balwinder
Abstract
Purpose
The purpose of this paper is to study the pattern of long-run performance of small and medium enterprises (SMEs) initial public offerings (IPOs) and examine the firm- and issue-related determinants of long-run performance of SME IPOs in India.
Design/methodology/approach
The 3 6, 9 and 12 months share returns of Indian SME IPOs is studied using event time methodologies, i.e. buy and hold returns, cumulative abnormal returns and wealth relatives on a sample of 375 SME IPOs issued during February 2012 to May 2018. Additionally, ordinary least square regression has been used to investigate the determinants of long-run performance of SME IPOs on a reduced sample of 104 because of non-availability of price observations.
Findings
The findings reveal that Indian SME IPOs exhibit long-run overperformance contradicting the international evidences of underperformance, and this overperformance is significantly evident using buy and hold abnormal return (BHAR). Furthermore, based on the divergence of opinion hypothesis, fads theory and windows of opportunity hypothesis, the results reveal that on one hand, issue size and oversubscription negatively affect BHAR, while on the other hand, auditor reputation, underwriter reputation, hot market, underpricing, inverse of issue price, profits prior to listing positively affect long-run performance. However, firm age, firm size, debt equity ratio, volatility and long-run performance computed through BHAR lacks significant relationship.
Research limitations/implications
The study relied on event time methodology of measuring aftermarket performance of one year because of the limited availability of price offerings. Hence, the study could be extended to analyze aftermarket returns over a period of three to five years to enable reaching the vivid conclusions. Calendar time methodology may also be used to compute abnormal returns.
Practical implications
The results based on the study provides an implication to the investors by providing them an opportunity to bank higher long-run returns by engaging in active and timely trading strategies. Nevertheless, the results also show that investors should be cautioned while taking investment decisions.
Originality/value
The study contributes to rising body of international literature by analyzing the larger and recent sample of IPOs issued from 2012 to 2018 listed on SME exchange.
Subject
Strategy and Management,General Economics, Econometrics and Finance,Business and International Management
Reference67 articles.
1. The long-run performance of IPOs: the case of the stock exchange of Mauritius;Applied Financial Economics,2014
2. Fads in the initial public offering market;Financial Management,1990
3. The long run share price performance of Malaysian initial public offerings (IPOs);Journal of Business Finance & Accounting,2007
4. Signalling by underpricing in the IPO market;Journal of Financial Economics,1989
5. The long-run performance of initial public offerings in Thailand;Applied Financial Economics,1999
Cited by
6 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献