scholarly journals IPO Intra Industry Effects on Peer Firm's Earnings, Composition and Stock Returns

2021 ◽  
Vol VI (II) ◽  
pp. 41-48
Author(s):  
Muhammad Irfan Khadim ◽  
Samreen Fahim Babar
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Time Lag ◽  
Abnormal Returns ◽  
Significance Test ◽  
Industry Effects ◽  
Cumulative Abnormal Returns ◽  
Long Run ◽  
Short Run

The present study is conducted to see how an IPO event affects the existing firm's performance within the same industry. For this purpose, 88 IPO firms were examined from Pakistan Stock Exchange (PSX) from 1998-2016. IPO is examined from three major perspectives IPO proceeds, initial returns and time Lag between IPO listing date and IPO subscription. The study uses Buy and Hold Abnormal Returns (BHAR) and Cumulative Abnormal Returns (CAR) to calculate competitor's abnormal returns. To calculate the operating performance of competitors, the Wilcoxon significance test was applied. IPO intra-industry effects are significant in the long run, whereas insignificant results are shown in the short run. In addition, IPO proceeds and abnormal returns are significant but negatively related to competitors' stock returns (long term). Moreover, Herfindahl Hirschman Index (HHI) finds IPO improves competitiveness in the industry environment. This present study is an important one from an emerging economy perspective.

scholarly journals Impact of Open-Market Share Repurchases on Long-Term Stock Returns

SAGE Open ◽  
2016 ◽  
Vol 6 (4) ◽  
pp. 215824401667019 ◽  
Author(s):  
Mohamed Albaity ◽  
Diana Syafiza Said
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Sampling Period ◽  
Share Repurchases ◽  
Open Market ◽  
Calendar Time ◽  
Price Performance ◽  
Long Run ◽  
Portfolio Approach

After the Asian financial crisis in 1997, firms listed on Bursa Malaysia were allowed to repurchase their shares on the open market. The number of companies engaged in share buyback is increasing and has become a tool to stabilize price by signaling undervaluation of the share. However, studies on share buyback in Malaysia are limited to the price performance surrounding the buyback events. This study aims to fill this gap by examining long-run price performance after the actual share buyback event over a sampling period of 2 years from 2009 to 2010 for Malaysian firms listed on FTSE Bursa Malaysia. There is no evidence to conclude that there exist long-term abnormal returns using the calendar-time portfolio approach that support the inefficient market hypothesis. On the contrary, buy-and-hold method was found to be significant supporting that the Malaysian stock market is semi-strong efficient.

scholarly journals The Aftermarket Performance of Initial Public Offerings in Pakistan

2016 ◽  
Vol 21 (1) ◽  
pp. 23-68
Author(s):  
Muhammad Zubair Mumtaz ◽  
Zachary A. Smith ◽  
Ather Maqsood Ahmed
Keyword(s):  
Initial Public Offerings ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Activity Period ◽  
Risk Level ◽  
Public Offerings ◽  
Explanatory Variables ◽  
Market Sentiment ◽  
Long Run

This paper estimates the aftermarket performance of initial public offerings (IPOs) listed on the Karachi Stock Exchange. The evidence confirms that IPOs generate statistically significant abnormal returns in the short run, which indicates that underwriters initially underprice IPOs when analyzed using a short time horizon. However, when using longer time horizons to estimate abnormal performance, the results indicate that IPOs underperform in the long-run. There is an apparent dislocation between the initial valuation set by underwriters and the premium paid by the market for these new issues. The market sentiment that causes this temporary disequilibrium eventually fades and the market reprices the newly issued shares. We conduct an extreme bounds analysis to test the sensitivity and robustness of 16 explanatory variables in determining the long-term performance of unseasoned newly issued shares. The results indicate that the long-term investment ratio, industry affiliation, market-adjusted abnormal returns, financial leverage, return on assets, IPO activity period, the aftermarket risk level of unseasoned issues, and the post-issue promoter’s holdings variables significantly affect IPOs’ aftermarket performance. Theoretically, the overreaction hypothesis, ex-ante uncertainty hypothesis and window-of-opportunity hypothesis best explain IPOs’ aftermarket performance in this study.

scholarly journals Stock market development and investment growth in Nigeria

2020 ◽  
Vol 42 ◽  
pp. 99-117
Author(s):  
Idowu Daniel Onisanwa ◽  
◽  
Mercy Ojochegbe Adaji ◽  
◽  
Keyword(s):  
Stock Market ◽  
Stock Exchange ◽  
Investment Climate ◽  
Stock Market Development ◽  
Turnover Ratio ◽  
Long Run ◽  
Short Run ◽  
Market Capitalisation ◽  
Investment Growth

Aim/purpose – The poor investment climate is one of the reasons advanced for the slow pace of growth in Nigeria; evidenced by the absence or inadequate amount of investible funds in the productive sectors. While the money market in Nigeria provides very limited investment options, the underdevelopment and underutilisation of the Nigerian Stock Market constitute a drawback to the investment climate. However, any economy desiring sustainable development requires a long-term source of fund. Therefore, this study ascertains the perfor-mance of the stock market and investment growth nexus in Nigeria.Design/methodology/approach – The study is based on the neoclassical growth theory with a slight modification in the wake of Levine’s specification (2003), an augmented investment growth relationship was specified. This study utilises the Autoregressive Distributed Lag (ARDL) in establishing the co-integration relation between stock market development and investment growth. Gross capital formation was used as a proxy for investment growth while the stock market indicators are market capitalisation ratio, total value traded ratio and turnover ratio. The study utilises data covering 1981 to 2018, sourced from the Nigerian Stock Exchange annual reports and diverse publication of the Nigerian Bureau of Statistics.Findings – The market capitalisation ratio had a negative impact on gross capital for-mation both in the short run and the long run, but its significance is only evident in the short run. The turnover ratio had a negative and significant impact on investment growth. The total value traded ratio exerted a positive and significant impact on gross capital formation both in the short run and the long run. The coefficient of the error cor-rection term was negative and statistically significant. Research implications/limitations – The total value traded ratio enhanced investment growth in Nigeria. Both market capitalisation and turnover ratio dampen investment growth. The Stock Exchange is not efficient and does not possess the amount of liquidity required to finance long term investment need in Nigeria. Emphasis on measures geared towards increasing efficiency and liquidity should be intensified by the government. Mean-while, the sectorial analysis of the impact of stock exchange movements in Nigeria and the use of other estimation techniques may create room for more robust relationships.Originality/value/contribution – The study directly investigates the capability of the Nigerian stock market in driving investment, both in the short and long run.

Performance of IPOs of Indian Companies Backed by Private Equity

2019 ◽  
Vol 23 (4) ◽  
pp. 397-409
Author(s):  
Till Drebinger ◽  
Shailendra Kumar Rai ◽  
Heiko Hinrichs
Keyword(s):  
Initial Public Offerings ◽  
Private Equity ◽  
Positive Impact ◽  
Abnormal Returns ◽  
Public Offerings ◽  
Ipo Performance ◽  
Cumulative Abnormal Returns ◽  
Long Run ◽  
Short Run ◽  
The Impact

We examine 616 Indian initial public offerings (IPOs), including 116 IPOs backed by private equity (PE), between 2000 and 2016, to test whether PE-backed IPOs perform better than non-PE-backed IPOs in the short run as well as in the long run in terms of cumulative abnormal returns (CARs). We also examine the impact of the PE firm nationality on post-IPO performance. Consistent with the existing literature, we find underperformance for all IPOs, on an average, within 1 year. However, PE-backed IPOs have lower degree of underperformance than non-PE-backed IPOs. We also find that size, liquidity and leverage have a positive impact on the post-IPO performance after the financial crisis, whereas issue amount and capital issue year are negatively correlated to CARs before and during the crisis. We also find significant effects of PE firm nationality on CAR development. IPOs backed by India-dedicated PE firms perform best, while those backed by foreign PE firms perform worst and even underperform non-PE-backed IPOs. IPOs by foreign PE firms perform better if they co-invest with India-dedicated PE firms.

Liquidity and Profitability: A Co-Integration Study

2018 ◽  
Vol 21 (02) ◽  
pp. 1850011
Author(s):  
Khairul Alom
Keyword(s):  
Firm Size ◽  
Stock Exchange ◽  
Response Analysis ◽  
Causality Test ◽  
Speed Of Adjustment ◽  
Financial Firms ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run

This paper examines the relationship between liquidity and profitability of the non-financial firms listed in Dhaka Stock Exchange (DSE) for the period of 1998–2013. Pedroni and Johansen co-integration results show that liquidity, profitability, firm size and long-term debt (LTD) have significant co-integration relationship in the long run. The causality test results expose that a strong bidirectional casual relationship exist among the variables of liquidity and profitability, LTD and liquidity profitability and firm size in the short run. Also, there exists unidirectional causality among the variables of firm size and liquidity, profitability and LTD in the short run. Furthermore, Pooled Mean Group results show that profitability, firm size and LTD have long-run co-integration relationship with liquidity. However, in the short run, profitability and LTD significantly contribute to the liquidity and the error correction mechanism shows that speed of adjustment to equilibrium is significant within the year. Impulse response analysis indicates shocks in the firm size, LTD and profitability have positive and significant impact on liquidity.

scholarly journals An Analysis of the Long-Run Performance IPOs and Effects in the Kenyan Stock Market

2021 ◽  
Vol 90 ◽  
pp. 11-25
Author(s):  
Sarah Kinya Mburugu
Keyword(s):  
Stock Market ◽  
Abnormal Returns ◽  
Secondary Data ◽  
Sampling Technique ◽  
Fair Value ◽  
Cumulative Abnormal Returns ◽  
Long Run ◽  
Descriptive Survey ◽  
A Company

Listing of a company in the securities exchange has been observed to be followed by underpricing in the first day and long term period of underperformance in terms of pricing in the subsequent days. Consequently, there has been a considerable curiosity from stakeholders, investors and academics to comprehend the assessments of why companies go public and the issues surrounding the short and long-run performance of newly issued equities. Underpricing is necessary to induce uninformed investors to participate in IPO offering when faced with adverse selection from informed investors. This often leads to first day price not reflecting a fair value of the IPO. The objective of the study was to determine the long-run performance IPOs and effects in the Kenyan stock market for the period 2007-2014. A descriptive survey research design was employed in the study. The population of the study encompassed all the 64 listed companies at the NSE as at 2016. The study employed a non-probability purposive sampling technique. Data collected for this study was secondary data obtained from NSE website, NSE price lists and the Central Bank of Kenya website for the period 2007 to 2014. The data obtained was analyzed using Statistical Package for Social Science (SPSS). Mean Average Buy and Hold Returns (MABHR), Abnormal Returns (AR) and Cumulative Abnormal Returns (CAR) were used to calculate the performance of the stocks. T-statistic for CAR was computed to the test for its significance. T-test was conducted at 95% confidence level to find if MABHR and CAR were statistically significant after IPOs announcement.

Inflation and Stock Returns: Implication for Nigerian Stock Exchange Market

2021 ◽  
Vol 6 ◽  
pp. 1
Author(s):  
Bidemi S. Adegboyega
Keyword(s):  
Stock Returns ◽  
Inflation Rate ◽  
Stock Exchange ◽  
Share Price ◽  
Convergence To Equilibrium ◽  
Dynamic Interactions ◽  
Causality Test ◽  
Analytical Technique ◽  
Long Run ◽  
Short Run

Understanding various hypotheses often dictates the nexus between inflation and stock returns and over the years studies have failed to establish which among these hypotheses are examined in Nigeria. Therefore, this present study examines the long-run relationships and dynamic interactions between stock returns and inflation in Nigeria using quarterly data of the All Share Price Index from the Nigerian Stock Exchange and Inflation rate together with other selected macroeconomic variables such as interest rate, exchange rate and growth in real GDP from 1985Q1 to 2018Q4. The analytical technique of Vector Error Correction Model, Johansen Co-integration technique and Granger Causality test were exploited. From the results, it is evident there exists a long run relationship between stock returns and inflation in Nigeria. The short run dynamic model also revealed that the speed of convergence to equilibrium is moderate implying that there is a short run relationship between stock returns and inflation. However, in order to establish the causal links and its directions between inflation rate and stock returns, the Johansen co-integration shows that there exist a unidirectional relationship between stock return and inflation rate. This is attributable perhaps to the instability of prices of stocks noticed over time and also the study supported the Proxy hypothesis. Based on the above, it is a perfect avenue for investors to use in an attempt to hedge against inflation.

Relationship between Inflation and Stock Returns – Evidence from BRICS markets using Panel Co integration Test

2015 ◽  
Vol 1 (1) ◽  
pp. 647 ◽  
Author(s):  
Vanita Tripathi ◽  
Arnav Kumar
Keyword(s):  
Stock Returns ◽  
Unit Root ◽  
Negative Relationship ◽  
Unit Root Test ◽  
Stock Index ◽  
Stationary Characteristic ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Stocks are generally considered to be a good hedge against inflation because of their tendency to move together. This paper examines long term relationship between inflation and stock returns in BRICS markets using panel data for the period from March 2000 to September 2013. Correlation results reveal a significant negative relationship between stock index and inflation rate for Russia and a significantly positive relationship for India & China. ADF, PP and KPSS unit root tests indicate non-stationary characteristic of the data. Further we find no long term co-integrating relationship between stock index values and inflation rates using Pedroni panel co integration test. These findings have important implications for policy makers, regulators and investment community at large. There may seem to be short term contemporaneous relationship between inflation and equity returns but in the long run they do not seem to be significantly integrated. Changes in inflation may bring some short run movement in stock return but certainly equity does not seem to be a good hedge against inflation in long run at least in emerging BRICS markets.                       Keywords:  BRICS, Stock Index, Inflation, Unit root test, Pedroni Panel Co integration Test, Johansen Co integration Test.

Nexus Between Discount Rate and Industrial Performance

2021 ◽  
pp. 097215092110287
Author(s):  
Ajab Khan
Keyword(s):  
Discount Rate ◽  
Capital Market ◽  
Stock Exchange ◽  
Oil Industry ◽  
Long Run ◽  
Short Run ◽  
Industrial Performance ◽  
Long Term Performance ◽  
Term Performance

This study investigates the short-run responses and long-run performances of seven industries’ stock indices with discount rate changes in the firms listed in the Pakistan Stock Exchange (PSE) between 2009 and 2018. The results indicate that short-run returns react positively to discount rate reduction, excluding the oil industry and vice versa. Therefore, long-term performance responds favourably with a reduction in the discount rate. Discount rate changes affect the apparel industry the most, while the oil industry is the least on the list. This study serves potential investors for their returns against investment among these industries. Furthermore, it works as a guideline for regulators and policymakers to manage fluctuations for a stable capital market.

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