Article

 

The Underperformance of IPOs: The Sensitivity of the Choice of Empirical Method (p.34-52)

by

Ahmad Mashal, ARAB OPEN UNIVERSITY

Walid Saleh, ARAB OPEN UNIVERSITY

Keywords : Initial public offerings (IPOs); long-run returns; emerging markets.

JEL classification : G14

Abstract

This paper investigates the performance of Jordanian initial public offerings (IPOs) using data from Amman Stock Exchange (ASE) over the period 1981-2002. We studied the sensitivity of the model used to estimate the cumulative average abnormal returns. In doing that, we employed three different models and used two approaches to test the result: Standard event-time analysis and the calendar-time approach. The three models used to estimate the cumulative average abnormal returns produce significant negative abnormal returns when we employ event-time analysis. However, the calendar-time approach concludes that the long-term performance of Jordanian IPOs is not different than that of the overall market.