| Summary: | ABSTRACT
Consistent with Khurshed et al. (1999), this study proposes that the long-term performance of IPOs is a function of pre-IPO factors prescribing the characteristics of firms, including firm size, risk, multi-nationality and industry categorisation, since the manner in which a company is run before it is listing on the stock exchange may give a strong indication of how its offering will perform in the long-run. With the aid of a new dataset collected from the UK IPO market between 1998 and 2002, this study aims to re-assess the validity of the findings generated in Khurshed et al. (1999), which seem to have been neglected by other empirical researchers.
In this paper, cross-sectional and regression analysis consistently suggest that initial IPO returns on the first trading day is the most significant predictor of IPO long-term performance and they are adversely related. Market capitalisation value and pre-listing profitability of a firm can also be used to gain important insights into the long-term potential of its offerings. While the power of other factors like multi-nationality, cost of flotation and ownership structure in explaining IPO long-term performance identified to be significant in Khurshed et al. (1999) were reported to be minor.
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