Abstract
The phenomenon of underpricing in initial public offerings has been one of the topics debated in the literature for a long time. Examining underpricing, which is an example of price anomalies, and analyzing its determinant factors are vitally important for the establishment of efficient capital markets. The aim of this study is to contribute to the existing literature on the underpricing anomaly observed in initial public offerings. For this purpose, the initial public offerings of companies in the health sub-sector whose stocks are traded in Borsa Istanbul for the period 2006 – 2021 are examined. The short-term price performance of the stocks included in the sample after the initial public offering is analyzed. The main problem for which the answer is sought in the study is whether an investor who buys stocks from the issuance in the initial public offering of the sample companies can get more returns than the market when they hold and sell these stocks for a short period of time.
The change in the initial returns of the initial public offerings of health companies, especially as a result of increasing health awareness after Covid-19, is also examined.
In the analysis, raw retıurn (RR), abnormal return (AR), cumulative abnormal return (CAR) and compound abnormal returns (BHAR) are calculated during the 1, 3 and 7 days, which are considered as analysis period. If the AR, CAR and BHAR calculated in the analysis are greater than 0 and the their values are statistically significant according to the t-test result, the existence of underpricing can be accepted.
According to the results of the analysis, a underpricing anomaly has not been found out in the initial public offerings of the health companies that formed the sample. Based on this finding, it can be expected that investors who bought a stock in an initial public offering would not have an abnormal return if they held it in portfolio basket for 1, 3, and 7 days of the analysis period. It can be recommended that investors not to choose health sector companies while investing in the public offering in terms of obtaining positive higher returns.
Keywords
Initial Public Offering Underpricing Anomaly Abnormal Return Healthcare Institutions t-test
References
- 1. Allen, F., Faulhaber, G. R. (1989). Signaling By Underpricing In The IPO Market. Journal of Financial Economics, (23). 303 - 323.
- 2. Allen, F., Brealey, R., Myers, S. (2011). Principles of Corporate Finance. New York: McGraw-Hill/ Irwin
- 3. Asquith, P., Mullins, D. W. (1986). Equity Issues And Offering Dilution. Journal of Financial Economics, (15). 61 - 89.
- 4. Brennan, M.J., and J. Franks, 1997, Underpricing, Ownership and Control in Initial Public Offerings of Equity Securities in the U.K., Journal of Financial Economics 45, 391-413.
- 5. Degutis, A., Novickytė, L. (2014). The Efficient market hypothesis : a critical review of literature and methodology, Ekonomika, 9(2), 7-23.
- 6. Fama, E., F. (1965). The Behavior of Stock-Market Prices, The Journal of Business, 38(1), 34-105.
- 7. Grossman, S., and O. Hart, 1980, Takeover Bids, the Free-Rider Problem and the Theory of the Corporation, Bell Journal of Economics 11, 42-64.
- 8. Ibbotson, R. G. (1975). Price Performance of Common Stock New Issues. Journal of Financial Economics, 2 (3). 235 - 272.
- 9. Ibbotson, R. G. Jaffe, J. F. (1975). Hot Issue Markets. The Journal of Finance, 30 (4). 1027 - 1042.
- 10. Ibbotson, R., G., Sindelar, J.,L., Ritter, J., R. (1994). The Market’s Problems with the Pricing of Initial Public Offerings, Journal of Applied Corporate Finance, 7 (1), 66-74.
- 11. Kulalı, İ. (2016). Etkin Piyasalar Hipotezi ve Davranışsal Finans Çatışması, Journal of Finance& Banking Studies, 5(2)Special Issue, 46-57.
- 12. Ljungqvist, A. (2004). IPO Underpricing : A Survey. Handbook in Corporate Finance, New York University Department of Finance.
- 13. Ljungqvist, A., V. Nanda, and R. Singh, 2004, Hot Markets, Investor Sentiment, and IPO Pricing, Journal of Business, forthcoming.
- 14. Loughran, T., Ritter, J., R. (2002). Why Don’t Issuers Get Upset About Leaving Money on the Table in IPOs?, The Review of Financial Studies Special, 15(2), 413-443.
- 15. Loughran, T., Ritter, J., R. (2003). Why Has IPO Underpricing Changed Over Time?, Financial Management, 33(3), 5-37.
- 16. Ritter, J. R. (1984). The Hot Issue Market of 1980. Journal of Business, 57 (2). 15 - 240.
- 17. Ritter, J. R. (1991) The Long - Run Performance of Initial Public Offerings. Journal of Finance, 46 (1). 3 - 27.
- 18. Ritter, J., R. (2022). Initial Public Offerings: Underpricing, https://site.warrington.ufl.edu/ritter/ (Accessed Date Rock, K. (1986). Why New Issues Are Underpriced. Journal of Financial Economics, (15). 187 - 212.
- 19. Stoughton, N. M., and J. Zechner, 1998, IPO Mechanisms, Monitoring and Ownership Structure, Journal of Financial Economics 49, 45-78.
- 20. Tufan, C., Sarıçiçek, R. (2013), Davranışsal Finans Modelleri, Etkin Piyasa Hipotezi ve Anomalilerine İlişkin Bir Değerlendirme, Trakya Üniversitesi Sosyal Bilimler Dergisi, 15(2), 159-182
- 21. Welch, I., 1992, Sequential Sales, Learning and Cascades, Journal of Finance 47, 695-732.
Abstract
References
- 1. Allen, F., Faulhaber, G. R. (1989). Signaling By Underpricing In The IPO Market. Journal of Financial Economics, (23). 303 - 323.
- 2. Allen, F., Brealey, R., Myers, S. (2011). Principles of Corporate Finance. New York: McGraw-Hill/ Irwin
- 3. Asquith, P., Mullins, D. W. (1986). Equity Issues And Offering Dilution. Journal of Financial Economics, (15). 61 - 89.
- 4. Brennan, M.J., and J. Franks, 1997, Underpricing, Ownership and Control in Initial Public Offerings of Equity Securities in the U.K., Journal of Financial Economics 45, 391-413.
- 5. Degutis, A., Novickytė, L. (2014). The Efficient market hypothesis : a critical review of literature and methodology, Ekonomika, 9(2), 7-23.
- 6. Fama, E., F. (1965). The Behavior of Stock-Market Prices, The Journal of Business, 38(1), 34-105.
- 7. Grossman, S., and O. Hart, 1980, Takeover Bids, the Free-Rider Problem and the Theory of the Corporation, Bell Journal of Economics 11, 42-64.
- 8. Ibbotson, R. G. (1975). Price Performance of Common Stock New Issues. Journal of Financial Economics, 2 (3). 235 - 272.
- 9. Ibbotson, R. G. Jaffe, J. F. (1975). Hot Issue Markets. The Journal of Finance, 30 (4). 1027 - 1042.
- 10. Ibbotson, R., G., Sindelar, J.,L., Ritter, J., R. (1994). The Market’s Problems with the Pricing of Initial Public Offerings, Journal of Applied Corporate Finance, 7 (1), 66-74.
- 11. Kulalı, İ. (2016). Etkin Piyasalar Hipotezi ve Davranışsal Finans Çatışması, Journal of Finance& Banking Studies, 5(2)Special Issue, 46-57.
- 12. Ljungqvist, A. (2004). IPO Underpricing : A Survey. Handbook in Corporate Finance, New York University Department of Finance.
- 13. Ljungqvist, A., V. Nanda, and R. Singh, 2004, Hot Markets, Investor Sentiment, and IPO Pricing, Journal of Business, forthcoming.
- 14. Loughran, T., Ritter, J., R. (2002). Why Don’t Issuers Get Upset About Leaving Money on the Table in IPOs?, The Review of Financial Studies Special, 15(2), 413-443.
- 15. Loughran, T., Ritter, J., R. (2003). Why Has IPO Underpricing Changed Over Time?, Financial Management, 33(3), 5-37.
- 16. Ritter, J. R. (1984). The Hot Issue Market of 1980. Journal of Business, 57 (2). 15 - 240.
- 17. Ritter, J. R. (1991) The Long - Run Performance of Initial Public Offerings. Journal of Finance, 46 (1). 3 - 27.
- 18. Ritter, J., R. (2022). Initial Public Offerings: Underpricing, https://site.warrington.ufl.edu/ritter/ (Accessed Date Rock, K. (1986). Why New Issues Are Underpriced. Journal of Financial Economics, (15). 187 - 212.
- 19. Stoughton, N. M., and J. Zechner, 1998, IPO Mechanisms, Monitoring and Ownership Structure, Journal of Financial Economics 49, 45-78.
- 20. Tufan, C., Sarıçiçek, R. (2013), Davranışsal Finans Modelleri, Etkin Piyasa Hipotezi ve Anomalilerine İlişkin Bir Değerlendirme, Trakya Üniversitesi Sosyal Bilimler Dergisi, 15(2), 159-182
- 21. Welch, I., 1992, Sequential Sales, Learning and Cascades, Journal of Finance 47, 695-732.
Details
| Primary Language | English |
|---|---|
| Subjects | Library and Information Studies |
| Journal Section | Research Article |
| Authors | |
| Publication Date | October 1, 2022 |
| Submission Date | July 5, 2022 |
| Published in Issue | Year 2022 |