Performance evaluation of the initial public offerings - the borsa İstanbul case

Following the enactment of the free market economy, Turkish capital markets was founded in mid-1980s and notwithstanding a long history of crisis such as the 1994, 2000-2001 and 2007-2008 global financial crisis, managed to continue its solid growth path. Despite some periods of initial slowdowns during the post-crisis era, the Turkish IPO market showed robust growth patterns in tandem with the Turkish economy. Primarily, due to their irregular return profiles across various geographies, the IPO phenomenons have been widely studied in the academic context. The main objective of this study is; by examining the short and long-term return performances of Turkish IPOs between 2010 and 2015, is to determine whether the investors who participated in Turkish IPOs during the same period were rewarded in both the short and the long term. Accordingly, the initial first-day return, 1st, 12th, 24th and 36th month market-adjusted abnormal returns (AR) and cumulative abnormal returns (CAR) of a customized IPO portfolio was analyzed by using the event method. Moreover, the abovementioned abnormal returns were also analyzed with respect to further classifications of the customized IPO sub-portfolio such as size (small vs. big), free-float percentage and sector (financials vs. non-financials). While the long-term return outlook for the customized IPO portfolio was relatively poor, this study found an average abnormal return of 2.9% and 3.1% for the initial first-day and first month return, respectively, though only the former was found to be statistically significant. Finally, at the end of the 36 months following the public offerings of the 53 firms in the custom IPO portfolio, the average value of CAR were found to be -%54.7. Additionally, 36 month CAR of the customized IPO sub-portfolios (size, free-float, sector) were also found to be strongly negative and statisticaly significant at %5 confidence level. All in all, the negative CAR values that supported poor long-term return distributions of the customized IPO portfolios were found to be statistically significant and consistent with the previous literature results.