The long-run performance of initial public offerings in Finland

Abstract

My paper analyses the opening price performance and the long-run performance of initial public offerings (IPOs) in Finland. The samples comprise 40 Finnish IPOs that went to the public during the time between 1998 and 2000. I found 46.75% initial return and the average offer-to-open return accounts for about 52.5% of the average initial return. The cumulative HEX General adjusted return at the end of three-year anniversary is -0.05% while cumulative HEX Portfolio adjusted return is 2.5%. This result is consistent with Ritter (1991)'s comment that the long-run after-market performance of IPOs is sensitive to the benchmark employed. The wealth relatives show that the long-run under-performance of IPOs is a general phenomenon. Due to the thin sample and the short study period, the results from cross-sectional analysis are not strong. Negative relationship is found between one-year HEX General adjusted return and the initial return when the fourth quintile is excluded; generally speaking there exits a negative relationship between the gross proceeds and the long-run market adjusted return; no systematic relationship is found between the long-run under-performance and the year of issuance; and positive relationship can be found between one-year HEX General adjusted return and the age of the firm when the last quintile is excluded.