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

Date of Publication

2008

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Commerce Major in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Leila Calderon Kabigting

Defense Panel Member

James Lago
Vivian Eleazar

Abstract/Summary

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.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU21832

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

80 leaves : illustrations

Keywords

Going public (Securities)--Philippines; Stocks--Prices--Philippines

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