Microsoft Word - 1829-7236-1-RV-writer2-new Th Per Receive doi:10.5 Abstra The glo financia Securiti Securiti paper in Zealand Using N method Two-sa in this s perform he Glob rforman The Uni The Uni The Uni ed: May 22, 5296/ajfa.v4 ct obal financ al system a ies Commi ies Act 200 nvestigates d firms’ Init New Zealan d which app ample mean study. The r mance befor bal Fin nce of I F iversity of W Private iversity of W Private iversity of W Private , 2012 A 4i2.1829 cial crisis h and econom ssion and 09, monetar the impact tial Public O nd firms’ I lies market -compariso result reveal re, during a nancial IPO: Th Fir itriya Fauzi Waikato, W e Bag 3105, E-mail: Nirosh Waikato, W e Bag 3105, S Waikato, W e Bag 3105, Accepted: A URL: htt had major my. It prom the NZ Re ry policy, l t of global Offering (IP IPOs from adjusted re n test and th ls that there and after th 180 Crisis’ he Case rms’ IP i (Correspon Waikato Man Hamilton 3 ff21@waik ha Hewa We Waikato Man Hamilton 3 Stuart Lock Waikato Man Hamilton 3 August 3, 20 tp://dx.doi.o effects on mpted resp eserve Bank liquidity m financial c POs) for the 2006 to 2 eturn and m he Multivar e is a signifi he global fin Asian Impac e Study POs nding autho nagement Sc 3240, New Z kato.ac.nz ellalage nagement Sc 3240, New Z ke nagement Sc 3240, New Z 012 Pu org/10.5296 the New Z ponses acro k policies, management crisis on sh e period befo 010, this st market mode riate Regres icant differe nancial cris n Journal of F ct on Sh y of New or) chool, New Zealand chool, New Zealand chool, New Zealand ublished: D /ajfa.v4i2.1 Zealand (N ss the full including and pruden ort-term pe fore, during tudy emplo l to calculat ssion Model ence betwee is. Further, Finance & Ac ISSN 19 2012, Vol. www.macrothi hort-ter w Zeal w Zealand w Zealand w Zealand December 1, 1829 NZ) capital l range of amendmen ntial polici erformance and after th oys an even te abnorma l (MVRM) en short-term , the MVRM ccounting 946-052X 4, No. 2 ink.org/ajfa rm land 2012 market, the NZ t of the es. This of New he crisis. nt study l returns. are used m IPOs’ M result support negativ average perform previou Key wo event st JEL Cla ts the two-sa e significan e market ret mance durin us studies co ords: Short tudy, New Z assification ample mean nt impact o turns. This s ng the globa onsider matu t-term perfo Zealand firm : G14 n-compariso n abnormal study provid l financial c ure markets ormance, In ms. 181 on test resu l returns, su des recent e crisis. A stu s like the US nitial Public Asian ult in which uggesting th evidence for udy of New S and the U c Offering ( n Journal of F 2008 and 2 hat it has u r New Zeala Zealand is UK. (IPOs), glob Finance & Ac ISSN 19 2012, Vol. www.macrothi 2009 period underperfor and IPOs’ s interesting bal financia ccounting 946-052X 4, No. 2 ink.org/ajfa ds have a med the hort-run as most al crisis, 1. Intro One of instituti compan the first private Furtherm improve manage costs of IPOs sh (NZX), of IPOs an oppo in the p The Ne market. Limited further NZ firm firms’ s conditio The glo in 2006 affect a To min many ch to enco by the N to revie Act was this acti The qu enough indicato consum March Predicti are barr Decemb the curr oduction f the most ional invest nies, they ne t sale of sto firms to ra more, they e their ove erial costs. T f setting up hould be no depending s’ cost. Furt ortunity for primary stoc ew Zealand The NZ I d listed their IPOs until H ms started to specific fac ons (such as obal financi 6. The crisis all the US se nimise the i hanges aim ourage confi New Zealan ew the Secu s to attract a ivity would uestion is w to induce or is the NZ mer confiden 2008, whic ions were fo riers that rem ber 2009, th rent state of important e tors, is the t eed to offer ocks by an ise a larger allow a fir erall financ Therefore, t an IPO. Fo o more than g on each fir ther, not on investors to ck markets, (NZ) IPOs IPO history r stock on t Hallesntein o list their sh ctors, and c s the global al crisis in s began with ectors and o impact of th med at pullin fidence and nd governm urities (Dis and retain m d strengthen whether New e investors Z Roy Mor nce rose to ch was the or the New main, which he Governm f New Zeal events in th transition fr their shares unlisted fir r pool of eq rm to raise ial conditio the benefit o or example, n 6-8% of th rm’s circum nly do IPOs o invest in t which prim s conduct ac y can be tra the NZSX i n Glassons H hares on the common fa financial cr 2007 and 2 h the defaul other countr he global f ng its regula ease of inv ment to encou closure) Am more compa the New Ze w Zealand’ and busine rgan Consu o its highes e first quar Zealand ec h prevent b ment set up and's capita 182 he life of a from being a s to the pub rm to the p quity capital many time on. Howeve of going pu , in New Ze the fund rai mstances. Th provide be the share of marily deal w ctivities in aced back t in 1904. Ho Holding Lim e stock mar actors, for e risis which 008 was sta lt of mortga ries, particul financial cri ations and po vestment in urage inves mendment anies to inve ealand econ ’s response esses to en umer Confid st level in e rter in whi conomy to e businesses s a Capital M al markets, Asian a firm, and a private to blic through public throu l than is av es that amou er, an IPO ublic must b ealand the c ised in the N he NZX lis enefit to the f growth of with the issu the NZSX, to the begin owever, afte mited listed rket. The pe example a happened a arted by the age loans in larly those w isis, the Ne olicies in lin New Zeala stment activ Act 2009. est and to d nomy. e to the glo nter and op dence Surve early Septe ch New Z exit recessio eeking to o Market Dev the internat n Journal of F d one of pa o a public c Initial Publ ugh stock m ailable from unt in one involves f e weighed a costs of rais New Zealan ting fees ar e issuers but the firm. A uance of new which is th nning of 19 er the first I their stock rformance o firm’s pres at the beginn e United Sta the US, an with tight tr ew Zealand ne with inte and. One of vities in its c The purpos do business i obal financi perate in N ey 2009, w ember 2009 ealand ente on in 2010. perate in N velopment T tional conte Finance & Ac ISSN 19 2012, Vol. www.macrothi articular int company. A lic Offering markets. IPO m any other offering an financial co against the sing equity nd Stock E re only a sm t also IPOs An IPO is co w securities he premier 900, when IPOs, there k in 1947; af of IPOs dep stige and ec ning of 200 ates subprim nd spread qu rade links to d governmen ernational st f the chang capital mark se of amend in New Zea ial crisis h New Zealan which indica 9 from the ered the re Neverthele New Zealand Taskforce to ext, future r ccounting 946-052X 4, No. 2 ink.org/ajfa terest to As public g (IPOs), Os allow r source. nd hence osts and massive through xchange mall part provide onducted s. equities Sanford were no fter that, pends on conomic 7). me crisis uickly to o the US. nt made tandards es made kets was ding the aland, as has done nd. One ated that level in ecession. ss, there d. On 16 o review risks and opportu Zealand recomm New Ze The sh Aggarw afterma 1988), signific first-day years (L returns perform regardle sometim Though years (L Zealand abnorm 0.86% r -0.47% outperfo abnorm losses a at a spe a given defined abnorm the mar The pur New Ze quoted represen US IPO 2. Liter The int show th markets to be “ Sindela Ljungqv unities and k d (Ministry mendations ealand's eco hort-term pe wal and Riv arket returns New Zeala cant afterma y returns of Lee, Taylo of 23% ov mance of IP ess of the m mes weeks) h the New Z Loughran e d IPOs are mal return fo respectively . An abnor formed or u mal return in against mark ecific time, b n period. To d as the sum mal return fo rket perform rpose of th ealand. A S firms are re nt major ac Os that typic rature Revi ternational hat the init s. This phen “leaving mo ar and Ritte vist and Wi key changes y of Eco will signifi onomic grow erformance voli (1990), s for IPOs and (Firth, arket returns f over 18% or, & Walte ver the pas POs has go method of p immediatel Zealand IPO t al., 2006) exhibiting or 2006, 200 y, and the o rmal return underperfor ndicates ca ket perform but it does n o account f m of all ab or New Zeal mance. is paper is Study of Ne elatively yo ctivities of th cally trade o iew evidence on tial underp nomenon is oney on th er (1994), ilhelm (200 s necessary nomic De icantly imp wth and New of IPOs h Ritter (199 in the US. 1997; Loug s. In additio (Loughran er, 1996), w st 20 years one through pricing, IPO ly following Os have exp , the data re g negative 07, 2008, 20 overall aver can be pos rmed the a apital gain mance. This p not take into for these no bnormal ret land IPOs su to investig ew Zealand ung and hav he NZSX a on the over-t n short-run pricing is c also known he table”. R Loughran 3) all found 183 to deliver t evelopment, prove the co w Zealande has become 91), and Lo Similar to ghran & R on, over the & Ritter, 2 while New s (Loughran h extensive Os tend to y g issue. perienced p eveal that d abnormal r 009 and 201 rage abnorm sitive or ne average ma while a ne provides a c o considera ormal varia turns over uggests that gate the sho d firms is in ve been list and they are the-counter n IPOs’ per common for n as short-r Ritter (199 and Ritter d underprici Asian the best pos , 2012). T ontribution ers' well-bein e the focus oughran and the US an Ritter, 2006) e last 40 ye 2006) and A w Zealand I n, Ritter, & observatio yield substa ositive abno during the g return. The 10 is -1.21% mal initial r egative, dep arket perfo egative abno crude measu ation fluctua ations, the c a defined t IPO stock ort-term stoc nteresting b ted for less e listed on th r market. rformance i r both dev run underpr 1), Keasey (1995), R ing in the U n Journal of F sible financ The Taskf that capita ng. s of attenti d Ritter (199 nd Australia ) is found t ars the US Australia for IPOs have & Rydqvist n and it ha antial return ormal return global finan New Zeal %, -0.60%, - return durin pending on rmance, an ormal retur ure of the st ations that n cumulative period of t s underperfo ck price beh because a la than twenty he full boar s mixed. T veloped and icing, as th and Short Ritter and W U.S. market. Finance & Ac ISSN 19 2012, Vol. www.macrothi cial system force belie al markets m ion. Reilly 95) report n a (Finn & H to have a n IPOs have r 12.1% for experience t, 2006). S as been fou ns in the da rns over the ncial crisis t land IPOs -0.20%, -0.7 ng 2006 to n whether th nd thus a rn indicates tock’s perfo naturally oc abnormal r time. The n formed com ehaviour of arge numbe y years. New rd in contra The existing d developin he company t (1992), Ib Welch (200 . Similar to ccounting 946-052X 4, No. 2 ink.org/ajfa for New eves its make to (1977), negative Higham, negative enjoyed over 20 d initial hort-run und that ays (and e past 20 the New average 78% and 2010 is he stock positive s capital ormance cur over return is negative mpared to IPOs in er of the w issues ast to the g studies ng stock appears bbotson, 02), and the US, Lee et market; underpr Loughr and Vo when o liability Zealand New Ze In a stu perform period f return o reports public short-ru availabl availabl buy sha investor Howeve hence t overval with the market (the imp greater overpric Further buy in, underpe internat variatio characte hypothe overval implica returns; In addit accruals reported al. (1996) ; Husson an ricing for o an and Ritt s (1992) fou only 15% of y. Surprisin d IPOs exhi ealand IPOs udy of a de mance of –1 from 1977 t of –29.13% that the un in the heav un IPO phe le in IPOs. le; this lead ares in less rs (Rock, 19 er, the afte the abnorm luation by in e "impresar for IPOs is presarios) to the initial r cing by inve , underprici in the hope erformance tional evide ons are due eristics of esis predict lued than o ation that th ; this pattern tion, the IPO s in the fis d at the tim and Gong nd Jacquillat other develo ter (2006) a und that mo f the US IP ngly, this st ibit differen s yield nega eveloped ma 3.73% in th to 1987. Li for a samp nderperform vy-volume nomenon. O The numbe ds to a poten s desirable 986). ermarket is mal returns nvestors in rio" hypothe s subject to o create the return at th estors will t ing can cre e that more of IPOs in ence is vari e, in part, to companies ts that firm ther IPOs ( he high-vo n exists in th Os’ underpe scal year of e of the off and Sekha t (1989), Le oped countr also found th ore than 28% POs were. T tudy reveal nt patterns f ative abnorm arket, Agga he first year kewise, Rit ple of 1,526 mance is con years. The One explan er of shares ntial “winne IPOs’ stoc not immed that ensue the early tr esis, or the f fads and th e appearance e IPOs date tend to be a eate a “casc investors w the afterma ied (Loughr o the differ s going pu ms going pu (Loughran lume perio he US. erformance f the IPOs, fering and c 184 ar (2001) r evis (1993), ries, such a he same res % of IPOs i This may be ls that duri from other c mal returns. arwal and R r following tter (1991) f 6 IPOs over ncentrated a ere are a n nation is the s subscribed er’s curse” f cks’; theref diately effic e to IPOs i rading (Agg fads hypoth hat IPOs ar e of excess e, the greate and the smal cade” effect will follow ( arket has no ran, Ritter, rences in r ublic (Firth ublic in hig & Ritter, 1 ods should e is also pos , because in consequently Asian reported un , and Kunz as European sult for the in the NZ sh e due to the ing the glo countries an Rivoli (199 g the initial found a sig r the period among youn number of e rationing d often far for investors fore, the IP cient in val investors a garwal & Ri hesis (Shille re underpric demand. Th er the degre ller subsequ t, whereby Ritter, 1998 ot been doc & Rydqvi regulations, h, 1997). gh volume p 995; Ritter be associat sitively relat nvestors m y overvalue n Journal of F nderpricing and Aggarw n countries New Zeala hare market e effect of d obal financi nd from pre 0) found ne offering for nificant me d 1975 to 19 nger firms a possible ex of a limited exceeds the s, because t PO sets a lo luing newly are the resu ivoli, 1990) r, 1990), wh ced by the i his hypothe ee of subseq uent returns initial inves 8; Welch, 1 cumented in st, 1994). T contractual The windo periods are r, 1991). Th ted with th ted to the si ay misinter e the new is Finance & Ac ISSN 19 2012, Vol. www.macrothi for the Au wal (1994) r . Firth (199 and market. t were unde differences ial crisis, t evious time egative afte r 1,435 IPO ean market- 984. Furthe and firms th xplanations d number o e number o the only opt ow price to y issued se ult of a tem ). This is co hich argues investment esis predicts quent corre should be. stors are en 992). Howe n all studies These inter al mechanis ow of opp more likel his has the he lowest l ize of discr rpret high e sues (Teoh, ccounting 946-052X 4, No. 2 ink.org/ajfa ustralian revealed 97), and Cheung erpriced, of legal he New s, as the ermarket Os in the adjusted er, Ritter hat went for the of shares of shares tion is to o attract ecurities, mporary onsistent s that the bankers s that the ection of nticed to ever, the and the rnational ms, and portunity ly to be testable long-run retionary earnings , Welch, & Won revalue income perform underpe To inve event st particul movem stock s introduc study, D increase noted th Myers ( Howeve Fama, F that has impact on the s event p revealed should g The nu perform H01 : H02 : H03 : H04 : 3. Meth 3.1 Da This stu NZX de The NZ were on well in represen ng, 1998). T the firm -increasing mance. Over erformance estigate the tudy relates lar informat ment. The ex split annou ced by Dol Doley found ed in 57 of hat studies i (1948), Bark er, event stu Fisher, Jens s been empl of earning stock price, period, and d that the s gain abnorm ull hypothe mance of IPO CAAR2006 (1 CAAR2007(1, CAAR2008(1, CAAR2009(1, hodology ata udy uses N eep archive ZSX market nly 23 IPOs capturing a nt the NZ IP hen, when h downward accounting rall, the inv or outperfo IPOs’ perf s to the inf tion, it will xamples of uncements, ley (1933), d a signific the cases a in the event ker (1956) a udy has bee sen and Rol loyed by m announcem using 29 m the abnorm stock price mal return fr esis is that O, and the h 1,T) is not sig T) is not s T) is not s T) is not s New Zealand . Firms used t is suited t s on the NZ aggregate l POs during high pre-iss s. This sce g adjustmen vestors’ sent ormance of t formance, p formation u reflect in t informatio and merg examined cant differen and declined t study field and Ashlery en popular s ll (1969). T ost research ments, and F months befo mal return w quickly ad from the spl t the glob hypotheses p gnificantly d ignificantly ignificantly ignificantly d firms’ IP d in this pap to large and ZSX. Thoug everage in the global f 185 sue earnings enario sug nts and unus ntiments tow the IPOs. previous stu uncertainty the firm val on affecting gers and ac the impact nce in the s d in only 26 d have been y (1962). since the sem They introdu hers until no Fama et al. ( ore the split was calcula djusted to th it announce bal financia proposed ar different fro y different fr y different fr y different fr POs for the per are thos d establishe gh only 23 the country financial cri Asian s are not sus gests that sually poor wards IPOs udies emplo in the mark lue, which i stock price cquisitions. of stock sp stock price 6 of the case n conducted minal work uced the m ow. Ball an (1969) exam was annou ated using he split ann ement. al crisis ha re as follow om CAAR200 rom CAAR2 rom CAAR2 rom CAAR2 period of 2 se who listed ed enterpris firms were y because th isis. n Journal of F stained, disa issuers hav post-issue e are an imp oy an event ket; when t is indicated e are earnin Event stu plit on the movement es. Further, since its in of Ball and ethodology nd Brown (1 mined the im nced to 30 the market nouncement as no imp w: 07(1,T), (T=1… 008(1,T), (T=1 009(1,T), (T=1 010(1,T), (T=1 2006-2010 d their IPO ses. From 2 observed, t he listed fir Finance & Ac ISSN 19 2012, Vol. www.macrothi appointed in ve unusual earnings an portant facto study analy the market d by the sto ng announc udy analys stock price in which t MacKinlay nitial momen d Brown (19 y of the eve 1968) exam mpact of sto months afte model. Th nt, and no i pact on sh …20 and 1… 1…20 and 1 1…20 and 1 1…20 and 1 collected f only on the 2006 to 201 the sample rms can be ccounting 946-052X 4, No. 2 ink.org/ajfa nvestors lly high nd return or in the ysis. An absorbs ck price cements, sis, first e. In his the price y (1997) ntum by 968) and nt study mined the ock split er as the he result nvestors hort-term …60) 1…60) 1…60) 1…60) from the e NZSX. 10, there may do used to 3.2 Met An even market to Brow give les Willing power Binder returns (2004) of the movem Market market Where R only req Market (MacKi the retu depend abnorm Where zero me Accord it may a bias, an for a se changes the resu follows are mor arising thod nt study me adjusted re wn and War ss benefit, w ger (1990) su equal to th affirms tha and the ma suggests tha abnormal ments; hence adjusted r return (Bro Rit and Rmt quires the re model is inlay, 1997) urn market on the R2 mal returns, w Rit and Rmt ean disturba ing to Blum affect the e nd the adjus ecurity in w s over time ult of bias; t s a linear tre re accurate. in the mark ethod is emp eturns and m rner (1980), which in fa uggested th he market a at the mean arket and ris at the mark return by e, this increa returns are own & Warn are the per eturn marke calculated ). This meth during the regression; which incre are the per ance term. me (1975), th empirical re stment of be which it w as the unce therefore se end, it can b . In addition ket. ployed in th market mode different ab act might w hat the mean and risk ad n adjusted sk adjusted et corrected removing ases the wid calculated ner, 1985). iod t return et. using Ord hod controls period esti ; the higher eases the pow 0 riod t return , , he estimate esults. There eta is impor ill be used ertainty aris everal time p be easily sho n, Blume’s 186 his paper to el are used bnormal ret worse off th n adjusted r djusted retu returns is returns in d model and the portion der possibili as the retu ns on securit dinary Lea s for the risk imated. The r R2, the gr wer to detec 0 ns on secur are the par d beta deriv efore, the e rtant since d to estimat ses in the va periods are own that the method is Asian analyse sh to calculate turn benchm he result. Fu returns and m urns in esti less power estimating p d the marke n of the r ity of detect urn differen ty i and the ast Square k (beta) of t e benefit of reater is the ct the abnor rity i and th rameters of ving from th stimated be it will be u te its marke alue of the used to me e estimated generally a n Journal of F ort-term per e abnormal marks used urther, Chan market adju imating par rful than th parameters. t model min eturns rela ting the even nce between e market por (OLS) reg the stock an f using the e reduction rmal perform he market p the market he historical eta has to b used to forec et risk. Fur expected re easure the b beta is unbi appropriate Finance & Ac ISSN 19 2012, Vol. www.macrothi rformance o returns. Ac in the even andra, Moria usted return rameters; h he market . Likewise, nimise the v ated to the ent effect. n stock ret rtfolio, this gression est nd the move market mo n in the var mance. portfolio, model. l data is bia be adjusted cast the fut rthermore, t eturn, which beta. If the t iased, so th for any co ccounting 946-052X 4, No. 2 ink.org/ajfa of IPOs; ccording t studies arty and ns have a however, adjusted Castillo variance market turn and (1) method timation ement of odel will iance of (2) (3) is the ased, and to avoid ture beta the beta h can be true beta e results onditions A linea calculat therefor Where period 2 The bet on the c the leng Ev T0 T0 : Lis T0 : 21s The eve necessa by the m and it i because result. F estimati inferenc cumulat Under t or varia The var ar regression ted using B re the result is the 2 and i ta in time p correspondi gth of the ev ent Window sting day to t trading da Figu ent window ary to captur market. The is preferabl e multiple e Furthermore ion window ces, and th tive abnorm the null hyp ance) in obs riance of CA n is a comm Blume’s m ts are more beta of sec s the error t eriod 2 (21s ing beta in t vent window w T1 20th trading y (after 1st d ure 3.3.1. Ab w is the num re both the e length of e to have t events with e, to calcula w, the abnor he aggrega mal return (C pothesis, H0 ervation len ARi is: , mon method ethod, to a accurate. T curity i in t term. The fo st trading da the time pe w and the es Estimati g day day trading) bnormal ret mber of tradi leakage and the event w the smallest hin an even ate the abno rmal returns ation is cal CAR) is use , that the ev ngth of the e 187 d used in the acquire unb The linear re time period ormula 1 is ay after listi eriod 1 (seco stimation w ion Window ) to 60th trad turn estimat ing days fol d the time n window is a t number o nt window m ormal return s in the sam lculated th ed to accom ,, ∑ vent has no event windo ~ 0, 1 Asian e beta estim biased beta egression for d 1, is used to calc ing day to 6 ond part of window used w (post-eve ding day tion using th llowing the needed for t a matter of of days in t may occur n variation o mple firms a hrough time mmodate a m⋯ ,∑ impact on t ow (MacKin, n Journal of F mation, and t for the fo r beta is: the beta of culate the be 60th trading 20 days). F d in this pap ent) he market m listing day the informa f judgement he event w and affect over the eve are aggrega e and acro multiple peri the behavio nlay, 1998) Finance & Ac ISSN 19 2012, Vol. www.macrothi the adjusted orecast peri f security i eta in time day), are re Figure 3.3.1 per. model that are con ation to be a t for the res window as p the signific ent window ated to draw oss securiti iod event w our of return : ccounting 946-052X 4, No. 2 ink.org/ajfa d beta is iod, and (4) in time period 2. egressed 1 depicts nsidered absorbed searcher, possible, cance of w and the w overall ies. The window. (5) (6) ns (mean (7) (8) The dis The agg The var The dis To sup Regress and is u MVRM advanta method equation While B uses ye When t N stock After te and all tribution of gregation is riance of the tribution of pport the t sion Model used to me M applying F age of the dology begi ns (Binder, Binder (198 ear dummy the explanat ks the system esting the M announcem f the CAR un calculated e cumulativ, f the CAAR two-sample l (MVRM) easure the e Fama et al. MVRM m ins by para 1985): 85) uses du to specify tory variabl m of return MVRM for e ments, and th nder H0 is n, ~ 0 through tim , ⋯∑∑ ve average a under H0 is, ~ 0 mean-com methodolog effect of ne ’s (1969) m method ove ameterising ummy varia which year les in the re equations is each firm, th hen the port 188 no abnorma0, , me and acros , abnormal ret 1 s no abnorm0, , mparison te gy, which ew informa method to m er other ev the abnorm ∑ ables to spe r has signif eturn genera s: ∑ his study ap tfolio return Asian l return, the ss securities turns (CAA mal return, th est, this st was first in ation on ass measure abn vent study mal returns ecify the an ficant impac ating proces pplies joint h n equation is n Journal of F en: s AR) is: hen: tudy emplo ntroduced b set prices. B normal retur methodolo s in the nnouncemen ct on abnor ss are the sa hypothesis s: Finance & Ac ISSN 19 2012, Vol. www.macrothi oys a Mul by Gibbons Binder (198 rn, and outl ogies. The e individua nt effect, th rmal return ame for eac testing for a ccounting 946-052X 4, No. 2 ink.org/ajfa (9) (10) (11) (12) (13) (14) ltivariate (1982), 85) uses lines the MVRM al return (15) his study of IPO. ch of the (16) all firms 4. Find Table 1 the aver from -0 firms’ p negativ the diff inflation yield cu long-ter terms o investm model. and hen Table 1 CAAR 2006 2007 2008 2009 2010 Table 2 abnorm returns indeed r returns market after th reflecte decline perform Howeve hold the market day ob dings presents d rage market 0.0039 to -0 performance e average a ferent calcu n into accou urve; the l rm bond w of risk and ment, which However, t nce provide . Descriptiv Obs Me 60 0.04 60 -0.06 60 -0.03 60 -0.07 60 -0.00 2 and Table mal returns across new reflections o and cumul model resp he issuance. ed in the de in the inv mance for N er, the resul e stock for l adjusted re served. Ab escriptive s t adjusted re 0.0767. Thi e was unde abnormal re lation used unt, wherea longer term was favoured return, an thus resulte the different a better exp ve Statistics Market A an Std.D 447 0.017 698 0.04 360 0.036 767 0.043 039 0.063 3 present th (CAAR). H w issuance a of IPOs per lative abnor pectively are . The avera ecline of CA vestment va New Zealan lts only sho longer perio eturns and m bnormal retu statistics for eturns for a is is signific r the marke turns for th for each m as during th m interest r d over shor d because ed in negati t calculation planation th s Adjusted Retu Dev. Min 75 -0.012 17 -0.124 68 -0.126 31 -0.141 37 -0.252 he average However, t and so it is rformance. F rmal returns e provided. age abnorm AAR. By d alue. The r nd IPOs wi ow short-ter ods may ma market mode urns from 189 ∑ r all year ob all years obs cantly diffe et performa he market m method, in w hat period N rates are hi rt-term bon of the inte ive abnorma n methods p han having o urns n Max 21 0.0751 45 0.0017 60 0.0318 18 0.0042 22 0.0740 abnormal re there are c of interest Furthermor s after listin The abnorm mal return i day 20, the results here ithin a ran rm performa ake substan el, is differe first tradin Asian bserved. As served yield erent from z ance. Howev model. The r which mark New Zealand igher than nd. Similarly erest rates, al returns fo provide grea only one me Mean 0.0084 -0.0148 0.0177 -0.0017 0.0561 eturns (AAR considerable t to examine e, the t-stati ng day usin mal returns in the first CAAR is - e indicate ge of 20 tr ance of IPO ntial profit. O ent from ze ng day to t n Journal of F can be seen d negative re zero, sugge ver, only 20 results diffe et adjusted d exhibited short-term y, stocks ar investors f or IPOs com ater robustn ethod. Market M Std.Dev. 0.0109 0.0189 0.0219 0.0111 0.0700 R) and the c e variations e whether t istics for the ng market a are shown day to fift 0.0078, sho a continuin rading days Os, and prob Overall, the ero and insig the twentiet Finance & Ac ISSN 19 2012, Vol. www.macrothi n, apart fro eturns, with esting that t 007 and 20 er solely be return did d an upward rates. This re more vo favoured lo mpared with ness for the Model Min -0.0154 -0.0434 -0.0197 -0.0328 -0.0946 cumulative s in the ab these variat e average ab adjusted ret for day 1 to fth day is n owing a sub ng deterior s after listi bably invest e t-statistics gnificant fo eth trading ccounting 946-052X 4, No. 2 ink.org/ajfa (17) m 2006, h a range he IPOs 09 yield cause of not take d sloping s means olatile in ong-term h market analysis, Max 0.0344 0.0248 0.0602 0.0245 0.1787 average bnormal tions are bnormal turn and o day 20 negative, bstantial ration in ing day. tors who test, for or all the day are negativ due to reduced Table 2 e, suggestin some reaso d reputation 2. Average a Days 1 - 2 - 3 - 4 - 5 0 6 0 7 - 8 - 9 0 10 0 11 0 12 - 13 0 14 0 15 - 16 - 17 - 18 - 19 - 20 - *sig. at 10%l ng that inve onable con n of investm abnormal re AAR s -0.0047 -0.0006 -0.0018 -0.0002 0.0129 0.0017 -0.0067 -0.0129 0.0102 0.0218 0.0049 -0.0118 0.0021 0.0033 -0.0006 -0.0024 -0.0053 -0.0165 -0.0005 -0.0007 level, **sig. at 5% estors react ditions, for ment bankers eturns after l Ma std.dev 0.0214 - 0.0243 - 0.0278 - 0.0226 - 0.0377 0.0205 0.0162 - 0.0808 - 0.0215 0.0930 0.0224 0.0644 - 0.0608 0.0263 0.0278 - 0.0177 - 0.0170 - 0.0440 - 0.0259 - 0.0201 - % level, and ***s 190 negatively r example s, and hence listing day arket Adjus t-test -0.2187 -0.0231 -0.0657 -0.0075 0.3416 0.0844 -0.4131 -0.1599 0.4769 0.2339 0.2191 -0.1832 0.0349 0.1246 -0.0223 -0.1371 -0.3139 -0.3757 -0.0181 -0.0369 sig. at 1% level Asian to the IPO. uncertainty e markets ha sted Return CAAR -0.0047 -0.0052 -0.0071 -0.0072 0.0056 0.0074 0.0007 -0.0122 -0.0020 0.0198 0.0247 0.0129 0.0150 0.0183 0.0177 0.0153 0.0099 -0.0066 -0.0070 -0.0078 n Journal of F The negati of the eco ave negative std.dev 0.0214 0.0243 0.0278 0.0226 0.0377 0.0205 0.0162 0.0808 0.0215 0.0930 0.0224 0.0644 0.0608 0.0263 0.0278 0.0177 0.0170 0.0440 0.0259 0.0201 Finance & Ac ISSN 19 2012, Vol. www.macrothi ive reaction onomic con ve sentiment t-test -0.2187 -0.2156 -0.2546 -0.3198 0.1496 0.3590 0.0430 -0.1513 -0.0920 0.2127 1.1014 0.2005 0.2472 0.6957 0.6365 0.8639 0.5861 -0.1496 -0.2724 -0.3870 ccounting 946-052X 4, No. 2 ink.org/ajfa n may be nditions, ts. Table 3 Table 4 days aft signific of abno in whic (1,T) is n this stu the yea which contribu . Average a Days 1 - 2 - 3 - 4 - 5 0 6 0 7 - 8 - 9 0 10 0 11 0 12 - 13 0 14 0 15 0 16 - 17 - 18 - 19 0 20 0 *sig. at 10% 4 presents t fter the issu cant differen ormal return ch they are c not significa dy. Hence, ars compare happened d uting to the abnormal re AAR s -0.0044 -0.0030 -0.0057 -0.0012 0.0132 0.0025 -0.0069 -0.0119 0.0118 0.0215 0.0032 -0.0137 0.0037 0.0030 0.0003 -0.0028 -0.0028 -0.0120 0.0023 0.0032 %level, **sig. at 5 the two-sam ance. Apart nt between 2 n calculation compared, a antly differe it can be c ed. The diff during 200 difference. eturns after l std.dev 0.0225 - 0.0273 - 0.0261 - 0.0214 - 0.0374 0.0185 0.0148 - 0.0710 - 0.0222 0.0895 0.0198 0.0696 - 0.0619 0.0184 0.0205 0.0179 - 0.0173 - 0.0404 - 0.0248 0.0189 % level, and *** mple mean-c t from the m 20 trading d n. Further, th and thus thi ent from the oncluded th fferent CAA 8 and 200 191 listing day Market M t-test -0.1965 -0.1094 -0.2164 -0.0563 0.3525 0.1374 -0.4640 -0.1680 0.5337 0.2406 0.1605 -0.1968 0.0591 0.1633 0.0154 -0.1552 -0.1636 -0.2984 0.0946 0.1704 *sig. at 1% level comparison market mod days and 60 he results e is study reje e CAAR2007 hat there is AR may be 09; howeve Asian Model CAAR -0.0044 -0.0074 -0.0131 -0.0143 -0.0011 0.0015 -0.0054 -0.0174 -0.0055 0.0160 0.0192 0.0055 0.0092 0.0122 0.0125 0.0097 0.0069 -0.0052 -0.0028 0.0004 n test for 20 del’s 20 trad trading day xhibit signi ects the null 7(1,T), and fo a significan the result r, other ca n Journal of F std.dev 0.0225 0.0273 0.0261 0.0214 0.0374 0.0185 0.0148 0.0710 0.0222 0.0895 0.0198 0.0696 0.0619 0.0184 0.0205 0.0179 0.0173 0.0404 0.0248 0.0189 0 trading d ding days, t ys using two ficant coeff l hypothesis or all compa nt differenc of the glob auses seem Finance & Ac ISSN 19 2012, Vol. www.macrothi t-test -0.1965 -0.2715 -0.5000 -0.6674 -0.0289 0.0790 -0.3659 -0.2445 -0.2484 0.1790 0.9686 0.0792 0.1481 0.6611 0.6091 0.5436 0.3984 -0.1278 -0.1137 0.0214 days and 60 the results s o different m ficients for a s that the CA ared years t ce of the CA bal financia to be pos ccounting 946-052X 4, No. 2 ink.org/ajfa 0 trading show no methods all years AAR2006 tested in AAR for al crisis, ssible in Table 4 C 2 2 2 2 * Finding Table 5 only 20 abnorm might b in the m directly perman value d from fin NZSX long-ter changes rate res negativ Table 5 4. Two-samp CAAR 2006 & 2007 2007 & 2008 2008 & 2009 2009 & 2010 *sig. at 10%level, g the signifi 5 provides t 008 and 200 mal returns o be also due mid-2006 an y held and nent (in thos declined abo nance comp also lead t rm bond ha s in the inv ulted in the e abnormal 5. OLS Regr P ple mean-co 7 7. 8 -3 9 4. 0 -4 l, **sig. at 5% lev cant differe the Ordinary 09 exhibit ne of IPOs sug to the glob nd beginnin via manag se cases wh out $5.5 bil pany failur to negative ad higher int vestor prefe e fall of the returns. ression resu Constant 2006 2007 2008 2009 2010 Obs. Wald Chi2 Prob.>Chi2 *sig. at 10%lev omparison t 20 tradin MAR .3821** .6041** .0123** 4.4418** vel, and ***sig. a ent CAAR f y Least Squ egative and ggest that th bal financial g of 2007; i ged funds) here a comp llion since es. The dec e sentiment terest rates erence of se e bond value ults 2 vel, **sig. at 5% l 192 test ng days MM 1.8540* 0.9994 1.2621 1.4409 at 1% level for the year uare (OLS) significant he market re l crisis that investors in . These lo pany fails). the start of cline in the s toward n compared t ecurities ins e and stock Coefficien 0.0010 -0.0009 -0.0020 -0.0026* -0.0027* (Omitted) 1380 5.89 0.2074 level, and ***sig Asian M ** 19.6 4 -4.7 5.5 9 -7.3 which it co regression coefficient eacts negati started to i ncurred loss sses can p For examp f 2007, and e market in new securit to short-term struments. F k value, and nt S ) (O g. at 1% level n Journal of F 60 trading MAR 6080** 7130** 583** 3278** ompared wit result. The s. The nega ively toward impact New es on equity persist long ple, in 2007 d was a mu ndices and s ies issuanc m bonds, w Further, the d so to for I td.Error 0.0011 0.0013 0.0016 0.0014 0.0014 Omitted) Finance & Ac ISSN 19 2012, Vol. www.macrothi g days MM 8.2590** -8.7135** 6.1126** -6.3189** th is necess e results rev ative and sig ds these IPO w Zealand e y investmen g-term, or e 7 Telecom’s ultiple of th stock prices ce. In addit which resulte e increased IPOs which ccounting 946-052X 4, No. 2 ink.org/ajfa * * sary, and veal that gnificant Os. This economy nts (both even be s market he losses s on the tion, the ed in the interest h yielded Figure adjusted abnorm observa the ben have be prime f and thu compan failures directly (GDP), econom prospec 1 and Figur d returns an mal returns f ation. Anoth eficiaries fr een astute e fixed intere us contribut nies went in s compound y to the fin the increa mic uncertai ct of new fir -0.15 -0.05 0.05 0.15 -0.12 -0.07 -0.02 0.03 0.08 re 2 depict nd market m for all years her explanat rom the cris enough earl st bonds w ted to the nto receiver ded the con nance comp se of the in inty combi rms (IPOs). Figure 1. A Figure 2. A 5 5 5 5 1 6 1 Averag 20 1 6 11 Averag 20 the average model respec s fluctuate b tion for thes sis will be fe ly in, or ah which, (with negative ab ship or liqu nditions of panies. In a nflation rat ined to low Average abn Average abn 11 16 21 ge Abnorma 006 2007 16 21 ge Abnorm 006 2007 193 e abnormal ctively. As between -0.0 se negative ew in numb head of, the h falling int bnormal re uidation in N f market st addition, th te, the incre wer market normal retur normal retur 26 31 al Returns Returns) 7 2008 26 31 mal Returns 7 2008 Asian returns for can be seen 04 and 0.03 fluctuation ber, there wi e crisis to h erest rates) eturns of IP New Zealan tability, as he decline ease of une t confidenc rns for 60 tr rns for 60 tr 36 41 4 (Market A 2009 36 41 s (Market M 2009 n Journal of F 60 trading n, apart from 3, suggestin abnormal r ill have bee have sold e will have POs. Furthe nd, and thes the capital of Growth employmen ce of inves rading days rading days 6 51 56 Adjusted 2010 46 51 5 Model) 2010 Finance & Ac ISSN 19 2012, Vol. www.macrothi g days using m 2010, the ng less outli returns is th en some. A equities and increased i ermore, 30 se finance c l market is Domestic nt added to stors regard s s 56 ccounting 946-052X 4, No. 2 ink.org/ajfa g market average er in the hat while few will d bought n value, finance company s related Product the NZ ding the Figure using m the CAA negativ econom differen CAAR Figur Figur 3 and Figu market adjus AR for 200 e cumulati mic conditio nt method p were obser -0.3000 -0.2500 -0.2000 -0.1500 -0.1000 -0.0500 0.0000 0.0500 0.1000 1 Cu -0.1500 -0.1000 -0.0500 0.0000 0.0500 0.1000 0.1500 0.2000 re 3. Cumul re 4. Cumul ure 4 exhibi sted returns 06, all coeffi ve average on which im provides dif rved to mov 6 11 umulative A 20 1 6 1 Cumulat 20 lative averag lative averag t the cumul and marke icients for t e abnormal mpacted the fferent resu ve upward. 16 21 Average Ab 006 2007 1 16 21 tive Averag 006 2007 194 ge abnorma ge abnorma ulative avera et model res the CAAR i return, su e IPOs per ults, which The differe 26 31 bnormal Re Returns) 7 2008 26 31 ge Abnorm Model) 7 2008 Asian al returns fo al returns fo age abnorm spectively. F in the years uggesting th rformance a can be seen ent patterns 36 41 eturn (Mar 2009 36 41 al Returns 2009 n Journal of F or 60 trading or 60 trading mal returns f Figure 3 sho observed te hat there w after 2006. n in Figure of the CAA 46 51 rket Adjust 2010 46 51 5 (Market 2010 Finance & Ac ISSN 19 2012, Vol. www.macrothi g days g days for 60 tradi ows that ap end to expe was turmoil However, 4 in which AR movem 56 ted 56 ccounting 946-052X 4, No. 2 ink.org/ajfa ing days art from erience a l in the using a h all the ments are due to t the aver 5. Conc The ph literatur suppose value. I Howeve negativ with tho returns This stu the peri IPOs ar average who bo perform trading results s differen coeffici hypothe on. Hen compar negativ An imm market consiste of 2006 becomin to the d sentime short-te long-ter IPOs. O financia Despite future i short ti framew that market rage abnorm clusions henomenon re. Based o ed to be the In this case er, this phen e abnormal ose reported for IPOs in udy examin iod 2006 to re varied o e abnormal ought IPOs mance. The r days and 6 show no sig nt methods ients for all esis that the nce, it can b red. Further e and signif mediate imp condition w ent with the 6 and 2007 ng a global difference. ent of the m erm IPOs’ rm IPO perf Overall, Ne al crisis/situ e the current in New Zea ime in offi work that wi model coun mal returns, of abnorm on investor fair value o IPOs are un nomenon se l returns for d from othe n Germany, nes the shor o 2010. The over the 20 returns unt at the close results reve 60 trading gnificant dif of abnorm l years in w e CAAR2006 be concluded r, the OLS ficant coeffi plication of t was unfavo e economic 7 had impa financial c For examp markets; as performanc formance an ew Zealand uation. t global glo aland is look ice, that it ill stimulate nting on the hence resul mal initial r rationality of IPOs, but nderpriced a eems not to r the first f er countries which is -12 rt-term IPO findings su 0 trading da til the fifth e of trading eal a continu days. In ad fference bet mal return which they 6(1,T) is not s d that there S regression ficients the result is ourable bec condition d cted on oth risis. Howe ple, setting s a result t ce alone is nalysis may d IPOs out oominess, fin king bright. is willing e confidence 195 e beta being ulting more p return of IP in an effici ut the offer p and exhibit fit New Ze few days af s. Prior rese 2.1% and -2 Os’ performa uggest that ays and 60 trading da g on the firs uing deterio ddition to t tween 20 tr calculation. are compa significantly is a signific n results re s that invest ause of the during 2008 her countrie ever, other c the offerin this impact s unable to y be needed tperformed nancial cris . The new G to implem e and put th Asian g estimated, positive retu POs has b ient market price is cons positive ab ealand IPOs fter listing d earch report 27.0% for J ance of list returns on 0 trading da ay are negat st day woul oration in sh the market ading days . Further, t ared, and th y different f cant differe eveal that ors acted ca e global fin 8 and 2009, es, by spre causes seem ng price too ts on IPOs explain th d to support on a short ses and rece Governmen ment the ne he country o n Journal of F , and the be urns. een well d , the first d sidered to b normal retu , as New Ze day. This fi ted that the apanese IPO ed firms on the short-te ays after th tive, sugges d have lost hort-term pe model’s 20 and 60 trad the results hus this stu from the CA nce of the C only 2008 autiously to nancial crisi where the ading all o m to be poss o high may ’ performan he overall p the short-te t-run basis essions do n nt has demo ecessary ch on the road Finance & Ac ISSN 19 2012, Vol. www.macrothi eta tends to documented day trading be set below urns in the s ealand IPOs inding is co negative ab Os. n the NZSX erm perform he listing d sting that in against the erformance 0 trading d ding days us exhibit sig udy rejects AAR2007(1,T) CAAR for t and 2009 avoid a los is. The evid US subprim over the wo sible in cont y result in n ance. Howe performanc erm perform during the not last forev onstrated, du hanges to s d to recover ccounting 946-052X 4, No. 2 ink.org/ajfa level up d by the price is w the fair short run. s exhibit onsistent bnormal X during mance of day. The nvestors e market over 20 days, the sing two gnificant the null ), and so he years exhibit ss, as the dence is me crisis orld and tributing negative ever, the ce; thus, mance of e global ver. The uring its set up a y. It has proven back to 6. Limi The fin through were an would l exchang Further any oth Referen Aggarw Manage Ball, R. of Acco Binder, Accoun Blume, 785-795 Brown, Financi Brown, Journal Capital Retriev http://w rce Castillo Estudio Chandr alternat depende Dolley, Busines Fama, E informa that it can a more nor itations ndings of th h publicly a ny problems limit the v ge from 200 , the conclu her events w nces wal, R., & ement, 19, 4 ., & Brown, ounting Rese J. J. (1985) nting Resear M. E. (197 5. S. J., & W ial Econom S. J., & W l of Financi Market D ed www.med.go o, A. (2004) os de Econo a, R., Mori tive return encies in ev J. C. (193 ss Review, 3 E. F., Fisher ation. Intern adapt swiftl rmal environ his study ar available da s relating to alidity of t 06 to 2010, usions are li which affecte Rivoli, P. 45-57. , P. (1968). A earch, 6, 15 ). On the use rch, 23(1), 3 75). Betas a Warner, J. ics, 8, 205-2 Warner, J. B ial Economi Developmen ovt.nz/busin ). The annou mía, 31(2), iarity, S., & generating vent studies 33). Charac 316—326. r, L., Jensen national Eco ly to amend nment. re restricted ata sources o data disclo he findings , which com imited to th ed an IPO’s (1990). Fa An empiric 59-178. e of the mul 370-383. and their re B. (1980). 258. B. (1985). U ics, 14, 3-31 nt Taskforc ness/econom uncement ef 177-205. & Willinger g models a . Journal of cteristics an n, M. C., & R onomic Rev 196 d and introd d to the lim such as ann osures or pr s. The num mprised onl he event dur s price were ads in the i al evaluatio ltivariate reg egression ten Measuring Using daily 1. ce. (2009). mic-develop ffect of bon r, G. L. (19 and the ef f Accounting nd procedu Roll, R. (19 view, 10(1), Asian duce policie mitation of t nual reports rofessional mber of IPO ly 23 IPOs, ring the glob e not consid initial publ on of accoun gression mo ndencies. T g security p stock retur . Ministry pment/capita nd and equit 990). A Re ffect of ac g Research, ure of comm 69). The adj 1-21. n Journal of F es that will e the data, w s and other accounting Os on the N limits the bal financia ered in this ic offering nting incom odel in event The Journal price perfor rns: The cas of Econom al-market-d y issues: Ev -examinatio ccounting f , 28(2), 398 mon stock justment of Finance & Ac ISSN 19 2012, Vol. www.macrothi encourage b which was c databases. practices, t New Zealan size of the al crisis only study. market. F me numbers. t studies. Jo l of Finance rmance. Jou se of event mic Devel developmen vidence from on of the p for cross-s 8-408. split-ups. 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