Firm Characteristics and Long-Run Abnormal Returns after IPOs: A Jordanian Financial Market Experience
- Fawaz Al-Shawawreh
- Osama Al-Tarawneh
This study aims to detect the long run performance of the Jordanian initial public offerings (IPOs) listed in Amman stock exchange during the period from (1st January, 1993 until 31st December, 2011). In order to achieve the study’s objectives, the researcher applied “The Event Study” approach on the study sample which is consisted of all the Jordanian initial public offerings that are listed in Amman stock exchange during the study period, which were (119) companies. We calculated the monthly returns of these companies for 60 months (5 years) after listing. Also, a simple linear regression model applied to explore the relationship between the companies’ characteristics such as (company age, size, the sector in which the company belongs, and the offer size), and the abnormal return (AR) by using the three benchmarks that are employed in the study. The results of the analysis showed that the study corresponds to most of the previous studies with regard to the long run underperformance phenomenon for the initial public offerings (IPOs), but the level of this underperformance was different based on the benchmark employed to measure the long run performance. This conclusion was also confirmed by some previous studies. This study showed that there are statistically significant differences in the abnormal returns (AR) after applying the three benchmarks by using the parametric ‘‘One Sample T-test”. Finally, by running simple linear regressions, the study showed that there is statistically significant positive relationship between the characteristics of the firm (size, age, sector, and offer size) and the abnormal return (AR) after applying various benchmarks.
- Michael ZhangEditorial Assistant