A comparison of the performance of foreign & local initial public offerings

• Main Authors: Fang, Jixian, Soh, Feng Qun, Su, Xinhui
• Other Authors: Nanyang Business School
• Format: Final Year Project
• Language: English
• Published: 2013
• Subjects: DRNTU::Business::Finance
• Online Access: http://hdl.handle.net/10356/51570
• Institution: Nanyang Technological University

Scholars have extensively examined the trends and motivations behind firms seeking to list in Singapore. However, little has been documented on the country specific factors and firm specific factors affecting the success of these listings in Singapore. This dissertation seeks to rigorously identify and analyse factors that affect the IPO performance of firms listed in Singapore. In-depth analyses would also be conducted on how these factors affect the performance of foreign firms as compared to local firms as well as the challenges foreign firms could face in maximising their proceeds from listing in Singapore. Extensive literature review was conducted on possible country and firm specific factors we could subsequently use in our regression analyses. We ultimately decided upon corruption rating as a proxy for host country risk and incorporated various firm specific factors into our hypothesis development, namely, age, market capitalisation, equity float, underwriter reputation and auditor reputation. On the whole, our empirical findings show that investors demand a higher premium from firms domiciled in a more corrupted country. However, when corruption was regressed against first year returns, we found that it was no longer significant. With regard to firm specific factors, we found that only market capitalisation was significant as a factor when regressed against first day. However, when regressed against first year returns, we found that the beta changed direction, suggesting that bigger companies actually perform better in the long run and is inconsistent with our hypothesis. We also found that the presence of a lower corruption enhances the positive relationship between market capitalisation and IPO performance.