An Analysis of Performance of Initial Public Offerings: a Case of Nairobi Stock Exchange
Abstract
This study analyses the initial returns and long-run performance of Initial
Public Offerings (IPOs) using a sample of companies listed on the Nairobi
Stock Exchange during the period 1984 to 2001. The study will hopefully
provide one emerging market case of international evidence on
performance of IPOs.
The central hypothesis under investigation in this paper is that IPOs are
usually underpriced in the short-run and that they underperform in the
long-run yielding negative abnormal returns during their first few years of
trading. Existing research on long term returns has tended to follow the
IPOs for three or five years after issuance.
Based on a sample of 14 IPOs, the results show an average market
adjusted abnormal return of 22.57% on the first day returns after the launch
of the IPOs with a standard deviation of 24% and a median of 17.42%. This
is consistent with previous research on t he initial performance of initial
public offerings that has been documented that abnormal returns are
obtained during the first day of trading following new issues.
Citation
MBASponsorhip
University of NairobiPublisher
University of Nairobi School of Business, College of Humanities and Social Sciences