The long run performance of initial public offerings: Evidence from the Philippine market covering the period 1997-2004

• Main Author: Aquino, Ana Kristina D.
• Format: text
• Language: English
• Published: Animo Repository 2008
• Subjects: Going public (Securities) > Philippines; Stocks > Prices > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18433
• Institution: De La Salle University

This paper investigates the long run performance of initial public offerings (IPO) in the Philippines from 1997 to 2004. In particular, the study investigates whether the underperformance anomaly, as reflected by subsequent decrease of stock prices and negative returns, exists in Philippine market. By using the performance methods of buy-and-hold returns (BAR) and cumulative abnormal returns (CAR), this paper finds no conclusive evidence of underperformance due to contradictory results derived from using monthly and firm level analyses. Specifically, using the monthly BAR method leads to underperformance in the long run. However, employing the monthly CAR method to examine the anomaly in a three year time frame shows evidence of the market outperforming. A similar result occurs when the analysis is performed through firm level. This this paper concludes that the study of long run performance is sensitive to the type of methodology used. Additionally, this paper used cross-sectional and regression analyses to investigate the relationship of several variables to the aftermarket performance of IPOs. Evidence suggests that younger firms that are financially sound before listing outperform and maintain their profitability position in the long run. Also, larger sized firms, measured by gross proceeds, have better performance in the aftermarket. On the other hand, having good profitability ratios like ROE, ROA and EPS lead to statistically significant evidence of underperformance in the post-IPO period, which contradicts conventional assumptions in the finance literature. Reasons due to the difference in the time period covered and the number of firms used in this study might contribute to these findings.