Motives and effects of the initial public offerings on the Warsaw Stock Exchange
DOI:
https://doi.org/10.12775/EQUIL.2015.020Keywords:
initial public offering, primary shares, secondary shares, motives for going publicAbstract
This paper empirically investigates the links between the motives for going public and changes in the market value and efficiency of new stock companies. Using a sample of 200 firms from Warsaw Stock Exchange between 2005 and 2012 I find that the principal purpose of initial public offering is raising additional capital by the company but divestment grounds of initial shareholders are also important. I find evidence that the sale of secondary shares in the initial public offering may be seen as a negative signal at aftermarket performance of the firm. The data reveal that the most adverse long-term changes in the market value and business efficiency are observed for those companies, where in the initial public offering both primary and secondary shares were sold.
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References
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Choi, S. D., Lee I. & Megginson, W. L. (2010), Do privatization IPOs outperform in the long run? Financial Management, 39(1). http://dx.doi.org/10.1111/j.1755-053X.2010.01069.x
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Megginson, W. L., & Weiss, K. A. (1991). Venture Capitalist Certification in Initial Public Offerings. The Journal of Finance, 46(3). http://dx.doi.org/10.2307/2328547
Mikkelson, W. H., Partch M. M. & Shah, K. (1997). Ownership and operating performance of companies that go public. Financial Economics, 44(3). http://dx.doi.org/10.1016/S0304-405X(97)00006-8
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Pagano, M., Panetta F. & Zingales, L. (1998). Why do companies go public? An empirical analysis. Journal of Finance, 53 (1). http://dx.doi.org/10.1111/0022-1082.25448
Pervan, M., & Višić, J. (2012). Influence of Firm Size on Its Business Success. Croatian Operational Research Review, 3.
Rangan, S. (1998). Earning management and the performance of seasoned equity offerings. Journal of Financial Economics, 50(1). http://dx.doi.org/10.1016/S0304-405X(98)00033-6
Rappaport, A.(1986). Creating Shareholder Value. The New Standard for Business Performance. New York: Free Press.
Ritter, J. R. (1991). The Long-Run Performance of Initial Public Offerings. Journal of Finance, 46(1). http://dx.doi.org/10.2307/2328687
Ritter, J. R., & Welch I. (2002). A Review of IPO Activity, Pricing and Allocations. The Journal of Finance, 57(4). http://dx.doi.org/10.1111/1540-6261.00478
Schuster, J. A. (2003). IPOs: Insights from Seven European Countries. Discussion Paper, 461. Financial Markets Group, London School of Economics and Political Science, London, UK
Siwek, P. (2005). Praktyka pierwszych ofert publicznych w Polsce, Warszawa: Wydawnictwa Fachowe CeDeWu.pl.
Teoh, S., Welch I., & Wong, T. (1998). Earnings management and the long-run market performance of initial public offerings. Journal of Finance, 53(6). http://dx.doi.org/10.1111/0022-1082.00079
Wang, C. (2005). Ownership and operating performance of Chinese IPOs. Journal of Banking & Finance, 29(7). http://dx.doi.org/10.1016/j.jbankfin.2004.07.003
Zheng, S. X. (2007). Are IPOs really overpriced? Journal of Empirical Finance, 14(3). http://dx.doi.org/10.1016/j.jempfin.2006.06.001
Ahmad-Zaluki, N. A. (2008). Post-IPO Operating Performance and Earnings Management. International Business Research, 1(2). http://dx.doi.org/10.5539/ibr.v1n2p39
Barnes, E., Cahill E. & Mccarthy, Y. (2003). Grandstanding in the U.K. Venture capital industry. Journal of Alternative Investments, 6(3). http://dx.doi.org/10.3905/jai.2003.319100
Benninga, S., Helmantel M. & Sarig, O. (2005). The timing of IPOs. Journal of Financial Economics, 75(1).http://dx.doi.org/10.1016/j.jfineco.2003.04.002
Black, B. S., & Gilson, R. J. (1998). Venture capital and the structure of capital markets: Banks versus stock markets. Journal of Financial Economics, 47(3). http://dx.doi.org/10.1016/S0304-405X(97)00045-7
Boulton, T. J., Smart S. B. & Zutter, C. J. (2010). IPO underpricing and international corporate governance. Journal of International Business Studies, 41(2). http://dx.doi.org/10.1057/jibs.2009.38
Brau, J. C., Li M. & Shi, J. (2007). Do secondary shares in the IPO process have a negative effect on aftermarket performance? Journal of Banking & Finance, 31(9). http://dx.doi.org/10.1016/j.jbankfin.2006.09.016
Brav, A., Geczy C. & Gompers, P. A. (2000). Is the abnormal return following equity issuances anomalous? Journal of Financial Economics, 56(2). http://dx.doi.org/10.1016/S0304-405X(00)00040-4
Auret, C. J., & Britten, J. H. C. (2008). Post-issue operating performance of firms listing on the JSE. Investment Analysts Journal, 68.
Choi, S. D., Lee I. & Megginson, W. L. (2010), Do privatization IPOs outperform in the long run? Financial Management, 39(1). http://dx.doi.org/10.1111/j.1755-053X.2010.01069.x
Clarke, J., Dunbar C. & Kahle, K. (2004). The long-run performance of secondary equity issues: a test of the windows of opportunity hypothesis. Journal of Business, 77(3). http://dx.doi.org/10.1086/386531
Coakley, J., Hadass L. & Wood, A. (2007). Post-IPO Operating Performance, Venture Capital and the Bubble Years. Journal of Business Finance & Accounting, 34 (9-10). http://dx.doi.org/10.1111/j.1468-5957.2007.02055.x
Copeland, T. E., Koller T. & Murrin, J. (2000). Valuation: Measuring and Managing the Value of Companies. New York: John Wiley & Sons.
Cumming, D. (2012). The Oxford Handbook of Entrepreneurial Finance. New York: Oxford University Press.
Cumming, D. J., & Johan S. A. (2009). Venture capital and Private equity Contracting. An International Perspective, Elsevier.
Fama, E. F., & French, K. R. (1996), Multifactor Explanations of Asset Pricing Anomalies. The Journal of Finance, 51(1). http://dx.doi.org/10.2307/2329302
Huyghebaert, N., & Van Hulle, C. (2006), Structuring the IPO: Empirical evidence on the portions of primary and secondary shares. Journal of Corporate Finance, 12(2). http://dx.doi.org/10.1016/j.jcorpfin.2005.01.001
Jain, B., & Kini, O. (1994). The post-issue operating performance of IPO firms. Journal of Finance, 49(5). http://dx.doi.org/10.1111/j.1540-6261.1994.tb04778.x
Jeng, L. A., & Wells, P. C. (2000). The determinants of venture capital funding: Evidence across countries. Journal of Corporate Finance, 6(3). http://dx.doi.org/10.1016/S0929-1199(00)00003-1
Kim, W., & Weisbach, M. S. (2008). Motivations for public equity offers: An international perspective. Journal of Financial Economics, 87(2). http://dx.doi.org/10.1016/j.jfineco.2006.09.010
Klein, D., & Li, M. (2009). Factors affecting secondary share offerings in the IPO process. The Quarterly Review of Economics and Finance, 49(3). http://dx.doi.org/10.1016/j.qref.2009.04.002
Kutsuna, K., Okamura H. & Cowling, M. (2002). Ownership structure pre- and post-IPOS and the operating performance of JASDAQ companies. Pacific-Basin Finance Journal, 10(2). http://dx.doi.org/10.1016/S0927-538X(01)00041-5
Lee, I. (1997). Do firms knowingly sell overvalued equity? Journal of Finance, 52(4). http://dx.doi.org/10.2307/2329442
Ljungqvist, A.(2006), IPO underpricing. In B. E. Eckbo (Ed.), Handbook of Corporate Finance: Empirical Corporate Finance. Elsevier.
Loughran, T., & Ritter, J. R. (1995). The new issues puzzle. The Journal of Finance, 50(1). http://dx.doi.org/10.2307/2329238
Loughran, T., Ritter, J. R. & Rydqvist, K. (1994). Initial public offerings: International insights. Pacific-Basin Finance Journal, 2 (2-3). http://dx.doi.org/10.1016/0927-538X(94)90016-7
Megginson, W. L., & Weiss, K. A. (1991). Venture Capitalist Certification in Initial Public Offerings. The Journal of Finance, 46(3). http://dx.doi.org/10.2307/2328547
Mikkelson, W. H., Partch M. M. & Shah, K. (1997). Ownership and operating performance of companies that go public. Financial Economics, 44(3). http://dx.doi.org/10.1016/S0304-405X(97)00006-8
Niresh, J. A., & Velnampy T. (2014), Firm Size and Profitability: A Study of Listed Manufacturing Firms in Sri Lanka. International Journal of Business and Management, 9(4). ). http://dx.doi.org/10.5539/ijbm.v9n4p57.
Pagano, M., Panetta F. & Zingales, L. (1998). Why do companies go public? An empirical analysis. Journal of Finance, 53 (1). http://dx.doi.org/10.1111/0022-1082.25448
Pervan, M., & Višić, J. (2012). Influence of Firm Size on Its Business Success. Croatian Operational Research Review, 3.
Rangan, S. (1998). Earning management and the performance of seasoned equity offerings. Journal of Financial Economics, 50(1). http://dx.doi.org/10.1016/S0304-405X(98)00033-6
Rappaport, A.(1986). Creating Shareholder Value. The New Standard for Business Performance. New York: Free Press.
Ritter, J. R. (1991). The Long-Run Performance of Initial Public Offerings. Journal of Finance, 46(1). http://dx.doi.org/10.2307/2328687
Ritter, J. R., & Welch I. (2002). A Review of IPO Activity, Pricing and Allocations. The Journal of Finance, 57(4). http://dx.doi.org/10.1111/1540-6261.00478
Schuster, J. A. (2003). IPOs: Insights from Seven European Countries. Discussion Paper, 461. Financial Markets Group, London School of Economics and Political Science, London, UK
Siwek, P. (2005). Praktyka pierwszych ofert publicznych w Polsce, Warszawa: Wydawnictwa Fachowe CeDeWu.pl.
Teoh, S., Welch I., & Wong, T. (1998). Earnings management and the long-run market performance of initial public offerings. Journal of Finance, 53(6). http://dx.doi.org/10.1111/0022-1082.00079
Wang, C. (2005). Ownership and operating performance of Chinese IPOs. Journal of Banking & Finance, 29(7). http://dx.doi.org/10.1016/j.jbankfin.2004.07.003
Zheng, S. X. (2007). Are IPOs really overpriced? Journal of Empirical Finance, 14(3). http://dx.doi.org/10.1016/j.jempfin.2006.06.001
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Published
2015-06-30
How to Cite
Sosnowski, T. (2015). Motives and effects of the initial public offerings on the Warsaw Stock Exchange. Equilibrium. Quarterly Journal of Economics and Economic Policy, 10(2), 207–222. https://doi.org/10.12775/EQUIL.2015.020
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Financial economics
