Is the success of an issuer an investor success? Evidence from Polish IPOs

Abstract

This article examines the factors that determine IPO success in raising equity capital, and how this success translates into investor success. The study is based on a sample of IPOs on the Warsaw Stock Exchange from 1998 to 2011. We find that pre-IPO profitability is a strong and positive signal for investors that translates into a higher offer price and therefore determines the success of the issuance. However, companies with high IPO success do not provide investors with better performance after going public, nor do they provide protection before the common phenomenon of long-term underperformance. A large-scale value migration between shareholders occurs in companies that achieve IPO success. The investor belief that pre-IPO profitability is a signal of the future earnings potential of an IPO firm indicates that they probably use simple heuristics and have a representativeness bias. ARTICLE HISTORY

Does ownership structure and market sentiment affect the performance of IPOs in India in short run? A dynamic panel data analysis

“…The success or failure (performance) of an IPO have different meaning for both the issuer and the investor. For issuer, the success of an IPO is measured by the amount of capital raised by them without losing their control over the company (Brycz et al, 2017). From the investor's perspective, the success of an IPO is measured in form of the returns he/she makes by selling these securities in future.…”

“…An IPO serves the objective of companies as the sale of new shares provides them with fresh capital. It also presents an opportunity for investors to best allocate their capital (Brycz et al, 2017) for future returns. Investors can realize returns in future upon selling these securities post their allotment and formal listing.…”

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

“…However, the relationship between around-the-IPO profitability was not so evident for long-term abnormal performance measured with BHARs as it was not robust to alternative methods. Brycz et al (2017) found that short-term IPO success is strongly determined by pre-IPO profitability, with no significant results for the long-term buy-and-hold returns. We propose to test the relationship for Polish IPOs using the improved estimation method of long-term performance.…”

“…The first studies mainly focused on the privatization issues (Aussenegg 2000;Jelic and Briston 2003;Lyn and Zychowicz 2003). More recently, long-term underperformance was found with the buy-and-hold approach, according to different benchmarks (Jewartowski and Lizińska 2012;Lizińska and Czapiewski 2016;Brycz et al 2017).…”

Market anomalies on the equity market in Poland – the survey of empirical studies

“…Długoterminowy underperformance, na który wskazywało wiele badań dla zagranicznych rynków, został również wykazany dla Polski (por. Brycz, Dudycz, Kowalski, 2017;Czapiewski, Lizińska, 2014;Jewartowski, Lizińska 2012;Lizińska, Czapiewski, 2016c).…”