| dc.description.abstract | Long run performance of IPOs has elicited much research the world over. Much interest
by scholars has been on the
anomalies on initial over performance and long run under
performance. It is amazing to note that majority of recent IPOs in Nairobi Stock
Exchange have been highly oversubscribed with Eveready recording over 800%, yet
research on IPOs point that IPOs under
perform the market in the long run.
The objective
f the study was to dete
rmine the effect of IPOs on long
-
run stock price performance of
companies listed at NSE.
A t
otal
of eight companies which made
IPOs between 2006
-
2011 where considered represe
nting
13.11% of the population. Data used was purely
secondary data from the NSE website and Central Bank. Collected data was analyzed
using M
ean
A
djustment
B
uy
H
old
R
eturns
and C
ummulative
A
bnomal
R
eturns
and test
of significance at 95% confidence level. The re
search
established
t
hat
IPO
s
of
Eveready
East Africa had highest subscription of 830%, Scan Group with 620%, Safaricom with
532%,
Kenya RE with 405%, Access Kenya with 363%, KENGEN with 333%, Co
-
Operative Bank Ltd with 80% and BRITAM with 60%
hence researc
h established that
IPOs where averaged oversubscribed by 402.8%
.
T
he study confirmed that
IPOs Over
performed the market by 0.537
% using MABHR methodology. However
i
nterestingly,
using CAR, IPOs over performed the market by 1.186
% presenting a
difference
of
0.649
% from results of MABHR methodology.
Testing at 95% confidence level t
here
was significance difference between MABHR and CAR in long run IPOs performance
hence the
study confirmed that
different results are obtained if different methodologies
are u
sed.
T
o improve on IPOs performance t
he CMA and NSE
should encourage and
provide favorable environment for more private companies to list in the NSE by relax
ing
the regulations in trading
. To promote true and correct pricing of shares, the minimum
shares t
raded should be raised so as to encourage individual and small & medium
enterprises investors to use institutional investors to trade at the stock market. Since
institutional investors are more enlightened on the correct valuation of shares, individual
and
SME investors will gain from the expertise of the institutional investors. The CMA
should have strict mechanism to ensure that poor IPOs are not offered in the market
especially during hot IPO periods.
Oversubscription by the companies will be eliminated
since the companies with highest subscriptions performed poorely compared to less
subscriped IPOs.
This will promise and ensure that investors are protected from
companies that want to take advantage of over valuations in the market arising from the
IPOs. | en_US |
