The long-run performance of initial public offerings: The case of Turkey

Abstract

The purpose of this paper is to investigate the long run stock price behavior of initial public offerings (IPOs) in Turkey. Our sample consists of 126 IPOs for the period from 1995 to 2000. We use four different methodologies to analyze the relative performance of IPOs for up to five years after listing. The sample displays evidence of underperformance when we use wealth relatives as a measure of long-run performance. Using equally weighted BHARs as an abnormal performance measure, we find that IPOs significantly underperform the Istanbul Stock Exchange 100 Index after two years, after three years and after five years. Significant underperformance is found for value weighted BHARs after two years and after five years. The sample displays evidence of no underperformance or overperformance when we use cumulative abnormal returns. A calendar-time analysis also provides no evidence of underperformance or overperformance. Eventually, the results show that the performance of IPOs in Turkey depends on the method of return measurement used. Our findings provide support for Fama (1998) who argues that long-term return anomalies can be due to methodology and most anomalies tend to disappear with the use of different methods. © EuroJournals, Inc. 2010.