Initial Public Offerings Short and Long Term Performance of MENA Countries

Abstract

This study examines a comprehensive set of 162 Middle East and North Africa (MENA) Initial Public Offerings (IPO's) for the period [2001][2002][2003][2004][2005][2006][2007][2008][2009][2010][2011][2012][2013][2014][2015], considered the first and most comprehensive data set investigated to date. Results confirmed that IPO performances are mixed among MENA countries classified into three groups. The first group comprises countries whose IPOs over-performed the Benchmark portfolio over the short-run, but underperformed over the long-run. The second group comprises countries where IPOs underperformed the Benchmark portfolio over the following 60 months post-listing date where such underperformance became quite significant over the long-run in comparison to the short-run. The third group comprises countries whose IPOs experienced cyclical performance change from over-performance to under-performance and vice versa. Overall, the IPOs went through cycles of price corrections around the fundamental value over the long term when compared to the short term performance. Keywords: IPOs, Investment decision, Assets allocation IntroductionThe literature is extensive, and indicates that initial public offerings (IPOs) tend to be underpriced in the short run, and then underperform the benchmark for three to five years following the offering date. For instance, Ibbotson (1975), Aggarwal and Rivoli (1990), Ritter (1991), Loughran and Ritter (1995), Levis (1993), Keloharju (1993), Rajan and Servaes (1997), Espenlaub et al. (2000), Mitchell and Stafford (2000), Jelic and Briston (2003), Lyn and Zychowicz (2003), Schultz (2003), Lee et al. (2011), andTomasz andJoanna (2012) note that, in general, excess returns over a threeto-five-year period after an offering are negative and significant. This was the case regardless of the employed benchmark. However, these studies also found that, over a five-year period, the underperformance was less dramatic

The Vanishing Role of IFRS Application on the Performance of Saudi Arabian IPO Companies

“…As a result of the low-quality information that is not already available in the primary market compared to the secondary market, this paper concludes that IFRS will not be of any help to investors of the secondary market who are interested in the financial reports of firms that have already been listed. The interpretation of this insignificant result is reinforced by a variety of earlier research that emphasize the differences in information asymmetry among the secondary and primary markets (Ritter 1991;Sehgal and Singh 2008;Dong et al 2011;AlShiab 2018). The findings demonstrate that the abundance of information available on the secondary market has the potential to assist investors in initial public offering in calculating the reasonable valuation in the first year after the stock's listing, thereby diminishing the significance of the IFRS in this sector of the economy.…”

The short- and long-lived effects of IFRS mandate on IPO firms in emerging market economies

“…For instance, Alanazi and Al-Zoubi (2015) found that IPO firms underperformed the All Share Index of Saudi Arabia by 8.92%, 24.17% and 28.15% for a one-, two- and three-year window, respectively. In contrast, AlShiab (2018) and Kamaludin and Zakaria (2018) provided empirical evidence showing that IPO firms listed in Saudi Arabia outperformed the Tadawul by 22% and 8.5% in 12 months, respectively.…”

A Performance based Ranking of Initial Public Offerings (IPOs) in India

“…However, our best possible search reveals a scantiness of the research in Indian context that carry out a comparative analysis of IPOs given a stabilizing period. In the literature it is evident that the researchers (e.g., Kooli and Suret, 2004;Ahmad-Zaluki et al, 2007;Lizińska and Czapiewski, 2018;AlShiab, 2018;Kamaludin and Zakaria, 2019) have attempted to conduct a post-issue long-term performance of the IPOs. However, the studies are limited to market performance only using return and risk parameters.…”