Datos informativos

This study evaluated the short-run market performance mainly considering both the first listing day return and the post-day-listing return. In line with other researchers (Aggarwal & Conroy 2000; Barry & Jennings 1993; Bradley et al. 2009; Chang et al. 2008; Schultz & Zaman 1994), the first listing day return, which is considered the total MR, was divided into the first listing day PRIM and SECON for the following reasons: (1) there is a significant price variation at the beginning and closing of the first trading day and (2) most previous studies have evaluated the short-run market performance using the first listing day total return, which is known as the closing price performance (using the return from the offer price to the closing price of the first trading day). This closing price performance (offer-to-close return) does not provide a clear answer about who is the beneficiary of short-run underpricing. To answer this question, Barry and Jennings (1993) initially proposed the opening price performance, which includes

5 _{Adjusted prices are those prices adjusted for any dilution factors such as bonus issues, rights issues and}

primary (offer-to-open or opening price return) and secondary (open-to-close or intraday return) MRs.

Figure 3.1 shows the relationship between first-day total MRs, PRIMs and SECONs.

Figure 3.1: The Relationship between First-Day Total Market Return (TR), Primary Market Return (PRIM) and Secondary Market Return (SECON)

The post-day listing returns are calculated up to nine trading days after the first listing day because this post-day period is indicated as a short period. Analysing IPO short-run market performance using first-day PRIMs, SECONs and post-listing returns has been given little attention in the IPO literature. A review of past Australian IPO studies has also shown that short-run market performance has not been analysed using first-day primary and SECONs. Therefore, first-day primary and secondary market analysis is a new contribution to the Australian IPO literature.

Figure 3.3 shows how to measure the short-run market performance using first-day PRIMs, SECONs, total MRs and post-day returns. The first-day primary and SECONs

are identified as opening price performance, and total MR is identified as closing price performance. The primary, secondary and total MRs are considered the first-day returns.

Figure 3.2: Measurement of Short-Run Market Performance

The RR and MAR are used to measure the short-run performance in the first listing day (primary, secondary, total markets) and the CAR used in the post-listing period. The first listing day primary, secondary market and total market RRs are calculated using the following equations.

where = the first listing day primary market RR for security measures between the PRICE and beginning of the first listing day price, = the beginning price of security at the first listing date and = the issue (offer) price of security at the time of issue.

where = the first listing day secondary market RR for security measures between the beginning, price and the closing of the first listing day, = the closing price of security at the first listing day and = the beginning price of security at

[ ]

where = the first listing day total market RR for security measures between the PRICE and closing of the first listing day price, = the closing price of security at the first listing day, = the issue (offer) price of security at the time of issue,

= the first listing day primary market RR for security and = the first listing day secondary market RR for security .

From the above RRs ( , and ), the market-adjusted abnormal/excess returns (MARs) and ARRs for each market are also calculated to measure the short-run market performance of IPO. The abnormal/excess return is considered a superior performance measure relative to the RR because it is adjusted by the MR. The MR can be calculated by available ASX indices such as ASX 200 and ASX 300. However, this study used the All Ordinary Index (ASX 500) as a market benchmark to measure the abnormal/excess MRs because this price index covers 95% of the value of all shares listed in the ASX (http://en.wikipedia.org/wiki/All_Ordinaries). The All Ordinary Index was obtained from the DataStream database. The following equations are used to calculate the MAR and the market-adjusted average abnormal return (AAR):

where = the market-adjusted abnormal rate of return for company (i) in period

(t), = the rate of return for company (i) in period (t) from , , and and = the rate of return on the benchmark (market) during the corresponding time period (t).

∑

where = the market-adjusted average abnormal return and n = the number of IPO companies in period (t).

In this study, the RRs were calculated using Equations 3.1, 3.2 and 3.3 and abnormal returns were calculated using Equations 3.4 and 3.5. To determine whether the average raw and abnormal returns were statistically significant, this study used the following t- statistics (Brown & Warner 1985; Omran 2005; Ritter 1991).

where = the market-adjusted average abnormal return for day t and = the cross- sectional standard deviation of the return for day t.

From the above AAR, this study calculated the market-adjusted CAR, following previous studies (Aktas, Karan & Aydogan 2003; Ritter 1991). This measure is useful to analyse the short-run performance of IPOs after the listing. Therefore, the CAR was calculated for nine post-listing days, which showed a short time period, using the following equation:6

∑

where = the market-adjusted post-day listing return (performance) from event day q to event day s.

The t-statistic for the CAR was computed as follows (Aktas, Karan & Aydogan 2003):

where _{and = the variance of MAR over t}

days.