The Analysis of IPO Efficiency on the Basis of Emerging Countries

<p>The main aim of the analysis is to study the effectiveness of IPOs in emerging markets.</p><p>To achieve this aim were the following objectives :</p><p>&bull; Observe methodology to study the effectiveness of the IPO</p><p>&bull; Compare different theories and identify factors influencing the short-term and long-term profitability</p><p>&bull; Assess the effectiveness IPO, using the methods CAR and BHAR</p><p>&bull; Establish represetative base reflecting the specifics of developing capital markets</p><p>&bull; Build an empirical model of short-term stock returns in the IPO process for companies in developing countries</p><p>&bull; Identify the determinants of long-term effectiveness IPO for developing countries</p><p>Object of study are the companies that operate in emerging capital markets and filed the IPO in the period under review . Subject of research are the factors influencing the effectiveness of initial public offering.</p><p>The work is devoted to the definition of short-and long-term effectiveness of the IPO , as well as the identification of the determinants of these efficiencies . In the theoretical part describes the basic model of primary shares underestimation. Also methods and features of evaluating the effectiveness of IPO were identified. In the practical part the determinant of short-and long-term effectiveness of IPO were defined on the base of companies from Russia and South Africa.</p><p>In this paper, the method of the event study, the definition of short-term ( 10 days ) outperformance of the method CAR, and for long-term (6 months ) - method BHAR. Determinants were defines as country and industry factors . The study was conducted on a database of companies in Russia and South Africa , who held the IPO process from 2002-2013.</p><p>Results:</p><p>There is negative relationship between charcteristics of IPO and short-term abnormal return, such as the size of the offering and the percentage of shares to be filed . Also returns have positive influence of the enterprise sector , innovative industries tend to get most of the outperformance . According to &nbsp;study in the Russian industry they include communications and transport , whereas in South Africa industry of manufacturing is also observed excess of outperformance over the shares of the companies belonging to other industries . For long-term outperformance of shares significant factors are the main characteristics of the company such as age and assets that have a negative relationship with the outperformance . Positive effect also remains in innovative industries and the negative - the percent of IPO.</p>