SHORT TERM UNDERPRICING ANOMALY AND ITS DETERMINANT FACTORS ON SEASONED EQUITY OFFERINGS: A RESEARCH ON THE STOCKS TRADED ON THE BORSA ISTANBUL (BIST)

Year 2019, , 1 - 16, 30.03.2019

Mustafa Cikrikci , Z. Feride Olcay , Mustafa Ozyesil

https://doi.org/10.17261/Pressacademia.2019.1011

Abstract

Purpose - The main objective of this study is to analyze the short-term price performance of the stocks issued by the 58 companies conducted 79 seasoned equity offerings (seos) during the 2010-2015 period in Borsa İstanbul and find out its determinant factors on the short-term price anomalies.

Methodology – Raw and abnormal returns were calculated then t statistics were obtained for each type of returns. All returns were compared to market average and peer groups returns. The hypotheses were tested via the comparison t statistics and t values. Regression analysis was used to determine what kind of determinants affect long-term price performance. To find out underperformance anomaly’s determinants regression analysis was used through Panel Dynamic OLS (PDOLS) method. The analysis was also conducted based on year and sector separately.

Findings- Short-term price performance of firms that performed seos during the 2010-2015 period are the function of two dimension consist of time duration and industry because price performance of the stocks can vary depending on these factors.

Conclusion- According to the t-test results, the short-term underpricing anomaly cannot be fully confirmed in Borsa Istanbul during the analysis period. It has been confirmed statistically only in 2011 and 2015 years and in the stocks of the industrial sector. In other words, it is possible for investors to obtain higher returns than market average in the short term if they purchase shares from the seos performed in 2011 and 2015 carried out by companies in the industry sector. Determinants that considered as independent variables in study include; Stock Price, Number of Public Offerings, Company Size, Public Offering Method, Transaction Volume, Difference, Leverage Ratio, Capital Increase Rate, M / B ratio and Volatility. Based on panel regression analysis, leverage ratio change, capital increase rate and public placement have positive effect on share price performance while other variables such as M / B ratio and private placement have a negative impact.

Keywords

Initial Public Offerings (IPO), Seasoned Equity Offerings (SEO), Price anomalies, Underpricing, Panel regression analysis

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