Performance of Initial Public Offerings: Critique and Update

Angelo A. Unite, Michael J. Sullivan


This paper investigates the short- and long-run performance of Philippine Initial Public Offerings (IPOs) from 1987 to 1997. We compare our results to those papers published in Philippine journals and discuss the shortcomings of these previous studies. Based in our results, we find that past researcher may have inadequately studied market price reactions to IPOs, and that IPOs earn, in average, returns 22.69 percent on the initial trading day. Over a three-year aftermarket period, returns total 48.33 percent or 5.44 percent less than a matched set of publiclytraded firms. This suggests that although investors in Philippine IPOs make significant returns in the initial trading day, if they hold stock of IPOs for a long period, they earned slightly lower average returns than if they had held other comparable stocks. We think that our estimates are derived in a manner consistent with international financial markets studies and that these results may be more accurate depiction of actual performance of Philippine IPOs.

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