An empirical analysis of the performance of initial public offerings at the Nairobi stock exchange
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Date
2012Author
Lishenga, Lisiolo
Ndatimana, Etienne
Type
ArticleLanguage
enMetadata
Show full item recordAbstract
Literature in developed markets has extensively documented the existence of three anomalies in the
pricing of initial public offerings (IPOs) of common stock. The phenomena have been are
recognizable as (1) the IPO under pricing, (2) the long run IPO underperformance, and (3) the "hot
issues" IPO market. Hitherto, evidence from the emerging regarding these anomalies has been scanty
and inconclusive. This paper contributes to IPO literature, by adducing NSE evidence on the first two
of the three anomalous regularities. We document evidence supporting the unequivocal initial under
pricing of IPOs at the NSE. Evidence on the long-run IPO under-performance leads to mixed
conclusions depending on how long the long-run is. There is evidence that IPOs underperform the
market on their third anniversary; this underperformance, however, dissipates so that by the fifth
anniversary the IPOs are doing just as well as, if not better than, the market benchmark. These
findings have implications for investors, market regulators and company management
Citation
African Journal of Business Management Vol. 1(No. 2), 2012 pp.106-123Publisher
Lecturer, Department of Finance and Accounting, University of Nairobi, Nairobi, Kenya MBA Student, University of Nairobi, Nairobi, Kenya
Subject
Initial public offering,Underpricing,
Underperformance,
Money-left-on-the-table,
Wealth relative.