The Long-Run Performance of Initial Public Offerings: South Korea Case

Abstract

In this research, we empirically investigated South Korean initial public offerings (IPOs) to provide one case of the international evidence on the long-run performance of IPOs. Our sample consists of 92 companies listed on the Korea Exchange (KOSDAQ) during the period 2015-2016. Unlike previous international evidence, our results reveal that the Korean IPOs outperform seasoned firms with similar characteristics. The results show that the three year buy-and-hold abnormal returns (BHAR) value is 28.3%. From 92 companies – 59 or 64% were overperformed the market, while 33 or 36% were underperformed. Thus, we can say about overall overperformance trend. Firm’s size and financial leverage variables are significant at the 5% level. Our results suggest that the divergence of opinion hypothesis (on the whole) do not apply to the case of Korean IPOs, however one sub-hypothesis (Size) is accepted. Based on multivariate regression model, firms with huge size and low financial leverage seem on average to experience greater long-run overperformance