The New Issues Puzzle

Loughran, Tim; Ritter, Jay R.

doi:10.1111/j.1540-6261.1995.tb05166.x

Cited by 2,507 publications

(865 citation statements)

References 50 publications

(54 reference statements)

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“…We focus in particular on the "abnormal return" (AR) method where accumulated returns to event firms are compared to accumulated returns of Index, typically matched on the basis of firm size, age, sector, and offer size. The findings of this study are in line with the results of many previous studies conducted the long run underperformance of IPOs, like (Ritter, 1991;Levis, 1993;Loughran & Ritter, 1995;Drobetz et al, 2005). These studies summarized and highlighted important empirical regularities; that the long run abnormal returns are often quite negative.…”

Section: Resultssupporting

confidence: 81%

“…Levis also confirms Ritter (1991) findings of statistically significant long run IPOs underperformance. Loughran and Ritter (1995) examined a sample of 4,753 US IPOs issued during ), Loughran and Ritter report that whether initial public offerings (IPOs) or seasoned equity offerings (SEOs) are significantly underperformed relative to non-issuing firms for five years after the offering date, the average annual return during the five years after issuing is only 5%for firms conducting IPOs, and only 7% for firms conducting SEOs. Barber and Lyon (1997) analyzed 1,798 US IPOs issued during July 1963 to December 1994 using CAR and BHAR, Fama and French three -factors model.…”

Section: Previous Literaturementioning

confidence: 99%

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Firm Characteristics and Long-Run Abnormal Returns after IPOs: A Jordanian Financial Market Experience

Al-Shawawreh¹,

Al-Tarawneh²

2015

IJEF

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This study aims to detect the long run performance of the Jordanian initial public offerings (IPOs) listed in Amman stock exchange during the period from (1st January, 1993 until 31st December, 2011. In order to achieve the study's objectives, the researcher applied "The Event Study" approach on the study sample which is consisted of all the Jordanian initial public offerings that are listed in Amman stock exchange during the study period, which were (119) companies. We calculated the monthly returns of these companies for 60 months (5 years) after listing. Also, a simple linear regression model applied to explore the relationship between the companies' characteristics such as (company age, size, the sector in which the company belongs, and the offer size), and the abnormal return (AR) by using the three benchmarks that are employed in the study. The results of the analysis showed that the study corresponds to most of the previous studies with regard to the long run underperformance phenomenon for the initial public offerings (IPOs), but the level of this underperformance was different based on the benchmark employed to measure the long run performance. This conclusion was also confirmed by some previous studies. This study showed that there are statistically significant differences in the abnormal returns (AR) after applying the three benchmarks by using the parametric ''One Sample T-test". Finally, by running simple linear regressions, the study showed that there is statistically significant positive relationship between the characteristics of the firm (size, age, sector, and offer size) and the abnormal return (AR) after applying various benchmarks.

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Section: Resultssupporting

confidence: 81%

Section: Previous Literaturementioning

confidence: 99%

Firm Characteristics and Long-Run Abnormal Returns after IPOs: A Jordanian Financial Market Experience

Al-Shawawreh¹,

Al-Tarawneh²

2015

IJEF

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“…In addition, the use of limited risk factors to estimate abnormal return leads the factor model approaches tend to be misspecified (Kothari and Warner (1997), Daniel andTitman (1997), andJegadeesh (2000). Loughran and Ritter (1995) suggested that the multi-factor model shows a lower ability in detecting abnormal returns. Fama and French (1992) recommended that future research needs to involve more factors and variables of firm characteristics to build the more representative estimation model of return.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Dividend Initiation on Short-run Return in Indonesia: An Event Study with Propensity Score Matching Approach

Sugeng

2016

IJBM

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Dividend initiation policy offers a relatively unique practical and conceptual characteristics compared to those of regular dividend. This study aims at investigating whether initial dividend policy of Indonesian firms affects short-run stock return, while further exploring the implementation of a new event study approach, propensity score matching, as an experimental-like design. This approach is based on actual rather than estimated abnormal return commonly used in traditional approach. Applying this new approach, this study found no significant abnormal returns around dividend initiation announcement by firms listed in Indonesia Stock Exchange. The findings imply that the dividend initiation behavior of Indonesian firms is proved not fully to follow the theoretical framework of signaling model, a dividend model which is basically developed primarily based on regular dividend behavior. The results partly contradict those findings mostly resulted from researchs conducted in advanced market context but seem to support contextuality argument of dividend policy. From methodological perspective, this study identified that the use of propensity score matching approach needs a large number of firms from which control firms are selected, accordingly the study conducted in market with limited number of listed firms such as in Indonesia could generates selection problem of control firms that optimally match treated firms.Keywords: dividend initiation, signaling theory, propensity score matching IntroductionSignaling model is one of the main theoretical explanatory models of dividend policy under the framework of the relevance of dividend proposition. Signaling model of dividend developed by Merton Miller and Modigliani (1961), Bhattacharya (1979), John and Williams (1985), and Miller and Rock (1985, builds upon the framework of asymmetric information. This model explains that the managers as corporate insiders use dividend policy as a means to provide a signal to the investors or market about private information associated with the prospects of the firm's performance. Therefore, according to the model, dividend policy taken by manager provides indication about the prospects of the firm's performance to the market.

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“…Apart from the selection of the appropriate method to measure abnormal returns (BHAR-method), the selection of suitable benchmarks is highly important as results change quite sensitively to the choice of respective benchmarks (Loughran & Ritter, 1995). In order to provide a very detailed analysis, exonerated from biases, various benchmarks are applied, with the aim of giving a comprehensive foundation of the right argumentation of the results.…”

Section: Selection Of Suitable Benchmarksmentioning

confidence: 99%

Market Performance of Sponsor-Backed Initial Public Offerings: An Empirical Analysis of the German Market

Maximilian¹,

Gupta²

2018

JEPF

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The New Issues Puzzle

Cited by 2,507 publications

References 50 publications

Firm Characteristics and Long-Run Abnormal Returns after IPOs: A Jordanian Financial Market Experience

Firm Characteristics and Long-Run Abnormal Returns after IPOs: A Jordanian Financial Market Experience

The Effect of Dividend Initiation on Short-run Return in Indonesia: An Event Study with Propensity Score Matching Approach

Market Performance of Sponsor-Backed Initial Public Offerings: An Empirical Analysis of the German Market

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