EQUITY OFFERINGS’ INITIAL AND AFTERMARKET PRICE PERFORMANCE IN FINNISH EQUITY MARKET: Empirical Evidence from Finnish IPOs and SEOs from 1997–2002

This study was to investigate if initial underpricing and aftermarket underperformance anomalies exist amongst Finnish unseasoned and seasoned equity offerings. Also cross-sectional returns analysis was conducted to examine, if some company-specific characteristic explain returns of offerings exceptionally well. Assembled data included 48 IPOs and 26 SEOs from years 1997–2002. Returns were adjusted with HEX portfolio index. Initial returns and 3-, 6-, 12- and 24-month aftermarket performance was analyzed. Statistical significance of results was tested with Student’s t-test. Cross-sectional patterns were analyzed with categorized portfolios and regression analysis. Significant conditional price trends were found. IPOs were underpriced 10,9 %, underperforming 2,4% to benchmark index after two years of aftermarket. SEOs were also underpriced 3,2%, but not significantly. SEOs underperformed 7,1% after two years of aftermarket. Industry, firm age and net sales were statistically significant explanatory variables for returns.