Determining the short-run and long-run performances of initial public offerings: An econometric analysis

In this study, determinants of short and long term price performances of stocks of 118 firms that are offered to the public for the first time in the period of 2002-2015 are examined by panel data analysis in the framework of abnormal returns adjusted for market returns and cumulative abnormal returns. In short term analysis; the abnormal returns of stocks are seen to be maximized on the fifth day following the start of trading on the stock market. In the first days following the initial public offering (IPO), the stocks belonging to the service sector and the financial sector companies provide positive abnormal returns while the industrial and technology sector firms are found to provide negative abnormal returns. The most important determinants of price performance of stocks on the first day are estimated to be market return, free float ratio, news about the firm, total revenue and firm size. The most important determinants of abnormal returns in the first 5-day period following the IPO of stocks are found to be the public flotation rate, total revenue and the size of the firm's total assets, while the most important determinants of abnormal returns adjusted for market returns in the first twenty-one day period are the number of contracts made on stocks, the transaction volume and the amount of transactions. In the long term price performance analysis; it is seen that stocks have a significant negative return in the first month, which is why over-valuations are generally made for companies. It is determined that the investors who bought the stocks of the firm that is offered to the public for the first time and held it for thirty-six months in the period of 2002-2008 have 43% loss on average and the investors who bought the stocks of the firm that is offered to the public for the first time and held it for thirty-six months in 2010-2015 period have 33.3% loss on average. The most important determinants of abnormal returns adjusted for market returns in the first thirty-six month period following the IPO of stocks are stock market composite return index, price volatility, domestic credit volume and industrial production index. The most important determinants of cumulative abnormal returns are; stock market composite return index, banking sector domestic credit volume and industrial production index. It is estimated that the most important long-term determinant of price performance is the change in domestic credit volume.