Explanatory Power of Pre-Issue Financial Strength for Long-Term Market Performance: Evidence from Initial Equity Offerings on an Emerging Market

Leszek Czapiewski , Joanna Lizińska


This study tests possible sources of long-term risk-adjusted returns on initial public offerings (IPO) in Poland under the calendar-time portfolio (CTP) approach. The moment of going public still remains a puzzle in many areas. Poland’s status as an emerging market has been indisputable for many years, though improvements in capital market infrastructure have led to its recent reclassification as a developed country. It is an important European equity market. Thus, research on IPO pricing explanation for Poland is important for both investors and academics. In this study, we estimate risk premiums and run regressions on four asset pricing models, including the latest innovation, which is the Fama-French 5-factor model. We also check the robustness. The research documents the existence of the long-run underperformance for Polish IPOs independently of the specification of the calendar-time portfolio approach as alphas range from -9.6% to -13.2% annually. We show that the underperformance is mainly driven by IPOs in a position of weak pre-issue financial health. More profitable IPOs experience less negative long-term returns and the underperformance is even absent in some specifications
Author Leszek Czapiewski (WZ / KFP)
Leszek Czapiewski,,
- Department of Corporate Finance
, Joanna Lizińska (WZ / KFP)
Joanna Lizińska,,
- Department of Corporate Finance
Journal seriesInternational Journal of Financial Studies, ISSN 2227-7072, (N/A 40 pkt)
Issue year2019
Publication size in sheets0.75
Keywords in Polishpierwotne oferty publiczne, zdarzenia na akcjach, metoda portfeli kalendarzowych, modele wyceny, premie za ryzyko, rentowność
Keywords in Englishinitial public offering; equity issue; calendar-time portfolio approach; asset pricing model; risk premium; profitability
URL https://www.mdpi.com/2227-7072/7/1/16
Languageen angielski
Score (nominal)40
Score sourcejournalList
ScoreMinisterial score = 40.0, 08-04-2020, ArticleFromJournal
Publication indicators WoS Citations = 0
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