IPO Valuation and IPO Inter-Industry Effects

Yıl 2021, , 418 - 438, 27.08.2021

Sureyya Burcu Avcı

https://doi.org/10.30784/epfad.831246

Cited By: 2

Öz

This study examines the valuation effects of initial public offerings (IPOs) and intra-industry effects of IPOs in Turkey between 2010 and 2018. The purpose of this study is to find out whether initial public offerings are overvalued and whether they impact the pricing of industry peers. First, the valuation of IPOs is investigated. Price-to-value ratios of Turkish IPOs are compared with sector average ratios to determine whether IPOs are overvalued. Turkish IPOs are not overvalued against industry rivals’ price-to-value ratios based on sales and earnings-before-interest-taxes-depreciation-and-amortization (EBITDA) and earnings. Similarly, valuation based on price-to-value ratios is not related to initial pricing of IPOs. Second, the intra-industry effects of IPOs are investigated. Sector-adjusted abnormal returns of IPOs are compared to market-adjusted abnormal returns. The results are not affirmative: There is no statistically significant difference between the two abnormal returns. Turkish IPOs do trigger significant price declines on rival companies’ stocks. Altogether, the findings indicate that there is neither overvaluation of IPOs nor intra-industry effects over rival companies. Companies do not time the market based on industrial overvaluation. This may indicate market efficiency or lack of competition in the IPO market.

Anahtar Kelimeler

IPOs, Valuation, Underpricing, Intra-Industry Effects, Price-to-Value Ratios

İlk Halka Arzlarda Değerleme ve İlk Halka Arzların Sektörel Etkileri

Öz

Bu çalışma 2010 ve 2018 döneminde Türkiye’deki ilk halka arzların değerleme etkileri ve sektörel etkilerini incelemektedir. Çalışmanın amacı ilk halka arzlarda yüksek değerlendirmenin ve ilk halka arzların aynı sektörde faaliyet gösteren halka açık şirketlere olumsuz bir fiyat etkisinin tespit edilmesidir. İlk halka arzların göreceli değerlerini belirlemek için fiyat-değer oranları, sektördeki diğer firmaların ortalama fiyat-değer oranları ile karşılaştırılmaktadır. Fiyat-değer oranları satışlar; faiz, amortisman ve vergi öncesi kar (FAVÖK); ve net kazanç tutarları kullanılarak hesaplandığında ilk halka arzlar yüksek değerlendirilmediği görülmektedir. Fiyat-değer oranları ilk halka arzların fiyatlaması ile de anlamlı bir ilişki sergilememektedir. İkinci olarak, ilk halka arzların sektörel etkilerini incelemek için ortalama pazar getirisine göre ayarlanmış anormal getiriler, ortalama sektör getirisine göre ayarlanmış anormal getirilerle karşılaştırılmaktadır. Sonuçlar olumlu değildir: Her iki getiri arasında istatistiksel olarak anlamlı bir fark bulunmamaktadır. Bu da ilk halka arzların rakip firma fiyatlarında bir düşüşe neden olmadığını göstermektedir. Sonuçlar beraber ele alındığında halka arz edilen hisse senetlerinde yüksek değerlendirme görülmemekte, ayrıca ilk halka arzlar sektördeki rakiplerin fiyatlarında etki yapmamaktadır. Şirketler halka arz edilmeyi planlarken sektörel bazda pazar zamanlaması yapmamaktadırlar. Bunun nedeni pazarın etkinliği olabileceği gibi ilk halka arz pazarındaki zayıf rekabet de olabilir.

Anahtar Kelimeler

İlk Halka Arz, Değerleme, Düşük Fiyatlama, Sektörel Etkiler, Fiyat-Değer Oranları

Kaynakça

• Akhigbe, A., Borde, S. F. and Whyte, A. M. (2003). Does an industry effect exist for initial public offerings? Financial Review, 38(4), 531-551. https://doi.org/10.1111/1540-6288.00059
• Akhigbe, A., Johnston, J. and Madura, J. (2006). Long-term industry performance following IPOs. The Quarterly Review of Economics and Finance, 46(4), 638-651. https://doi.org/10.1016/j.qref.2005.01.004
• Akhigbe, A., Madura, J. and Whyte, A. M. (1997). Intra-industry effects of bond rating adjustments. Journal of Financial Research, 20(4), 545. doi:10.1111/j.1475-6803.1997.tb00265.x
• Alford, A. W. (1992). The effect of the set of comparable firms on the accuracy of the price-earnings valuation method. Journal of Accounting Research, 30(1), 94-108. doi:10.2307/2491093
• Alti, A. (2005). IPO market timing. The Review of Financial Studies, 18(3), 1105-1138. doi:10.1093/rfs/hhi022
• Baker, M. and Wurgler, J. (2002). Market timing and capital structure. The Journal of Finance, 57(1), 1-32. doi:10.1111/1540-6261.00414
• Benveniste, L. M., Ljungqvist, A., Wilhelm Jr., W. J. and Yu, X. (2003). Evidence of information spillovers in the production of investment banking services. The Journal of Finance, 58(2), 577-608. doi:10.1111/1540-6261.00538
• Bhojraj, S. and Lee, C. M. C. (2002). Who is my peer? A valuation-based approach to the selection of comparable firms. Journal of Accounting Research, 40(2), 407-439. https://doi.org/10.1111/1475-679X.00054
• Cassia, L., Paleari, S. and Vismara, S. (2004). The valuation of firms listed on the Nuovo Mercato: The peer comparables approach. In G. Giudici and P. Roosenboom (Eds.), The rise and fall of Europe's new stock markets (pp. 113-129). Bingley: Emerald Group Publishing Limited.
• Chahine, S. (2004). Long-run abnormal return after IPOs and optimistic analysts' forecasts. International Review of Financial Analysis, 13(1), 83-103. https://doi.org/10.1016/j.irfa.2004.01.004
• Chang, K. P. and Tang, Y. M. (2007). Pricing Taiwan's initial public offerings. Asia-Pacific Journal of Accounting and Economics, 14(1), 69-84. doi:10.1080/16081625.2007.9720788
• Chemmanur, T. J. and Fulghieri, P. (1994). Investment bank reputation, information production, and financial intermediation. The Journal of Finance, 49(1), 57-79. doi:10.2307/2329135
• Cheng, L. T. W. and McDonald, J. E. (1996). Industry structure and ripple effects of bankruptcy announcements. The Financial Review, 31(4), 783-807. https://doi.org/10.1111/j.1540-6288.1996.tb00897.x
• Chevalier, J. A. (1995). Capital structure and product-market competition: Empirical evidence from the supermarket industry. The American Economic Review, 85(3), 415-435. Retrieved from http://www.jstor.org/
• Colaco, H. M. J., De Cesari, A. and Hegde, S. P. (2017). Retail investor attention and IPO valuation. European Financial Management, 23(4), 691-727. https://doi.org/10.1111/eufm.12113
• Cotter, J., Goyen, M. and Hegarty, S. (2005). Offer pricing of Australian industrial initial public offers. Accounting and Finance, 45(1), 95-125. doi:10.1111/j.1467-629x.2004.00137.x
• Crosby, N. (2000). Valuation accuracy, variation and bias in the context of standards and expectations. Journal of Property Investment and Finance, 18(2), 130-161. doi:10.1108/14635780010324240
• Deloof, M., De Maeseneire, W. and Inghelbrecht, K. (2009). How do investment banks value initial public offerings (IPOs)? Journal of Business Finance and Accounting, 36(1-2), 130-160. https://doi.org/10.1111/j.1468-5957.2008.02117.x
• Duman Atan, S., Özdemir, Z. A. and Atan, M. (2009). Hisse senedi piyasasında zayıf formda etkinlik: İMKB üzerine ampirik bir çalışma. Dokuz Eylül Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 24(2), 33-48. Retrieved from https://dergipark.org.tr/en/pub/deuiibfd/
• Fairfield, P. M., Ramnath, S. and Yohn, T. L. (2009). Do industry-level analyses improve forecasts of financial performance? Journal of Accounting Research, 47(1), 147-178. doi:10.1111/j.1475-679X.2008.00313.x
• Firth, M., Li, Y. and Wang, S. S. (2008). Valuing IPOs using price-earnings multiples disclosed by IPO firms in an emerging capital market. Review of Pacific Basin Financial Markets and Policies, 11(3), 429-463. doi:10.1142/S0219091508001428
• Gebhardt, W. R., Lee, C. M. C. and Swaminathan, B. (2001). Toward an implied cost of capital. Journal of Accounting Research, 39(1), 135-176. doi:10.1111/1475-679x.00007
• Geddes, R. (2003). IPOs and equity offerings (Global Capital Markets Series). Oxford: Butterworth-Heinemann.
• Gupta, C. P. and Suri, S. (2017). Valuation and pricing of Indian IPOs. Vision, 21(4), 375-384. doi:10.1177/0972262917734706
• Helwege, J. and Liang, N. (2004). Initial public offerings in hot and cold markets. The Journal of Financial and Quantitative Analysis, 39(3), 541-569. Retrieved from http://www.jstor.org
• How, J., Lam, J. and Yeo, J. (2007). The use of the comparable firm approach in valuing Australian IPOs. International Review of Financial Analysis, 16(2), 99-115. https://doi.org/10.1016/j.irfa.2006.09.003
• Hsu, H. C., Reed, A. V. and Rocholl, J. (2010). The new game in town: Competitive effects of IPOs. The Journal of Finance, 65(2), 495-528. https://doi.org/10.1111/j.1540-6261.2009.01542
• Jain, B. A. and Kini, O. (1994). The post-issue operating performance of IPO firms. The Journal of Finance, 49(5), 1699-1726. doi:10.2307/2329268
• Kim, M. and Ritter, J. R. (1999). Valuing IPOs. Journal of Financial Economics, 53(3), 409-437. https://doi.org/10.1016/S0304-405X(99)00027-6
• King, B. F. (1966). Market and industry factors in stock price behavior. Journal of Business, 39(1), 139. doi:10.1086/294847
• Lev, B. (1969). Industry averages as targets for financial ratios. Journal of Accounting Research, 7(2), 290-299. doi:10.2307/2489971
• LeClair, M. S. (1990). Valuing the closely-held corporation: The validity and performance of established valuation procedures. Accounting Horizons, 4(3), 31. https://doi.org/10.1023/A:1012050524545
• Lie, E. and Lie, H. J. (2002). Multiples used to estimate corporate value. Financial Analysts Journal, 58(2), 44-54. https://doi.org/10.2469/faj.v58.n2.2522
• Loughran, T., Ritter, J. R. and Rydqvist, K. (1994). Initial public offerings: International insights. Pacific-Basin Finance Journal, 3(1), 139-140. https://doi.org/10.1016/0927-538X(95)99082-D
• Lowry, M. and Schwert, G. W. (2002). IPO market cycles: Bubbles or sequential learning? The Journal of Finance, 57(3), 1171-1200. https://doi.org/10.1111/1540-6261.00458
• Lucas, D. J. and McDonald, R. L. (1990). Equity issues and stock price dynamics. The Journal of Finance, 45(4), 1019-1043. doi:10.2307/2328713
• Nanda, V. (1991). On the good news in equity carve-outs. The Journal of Finance, 46(5), 1717-1737. doi:10.2307/2328570
• Nguyen, T. (2011). Intra-industry effects of IPOs on stock repurchase decisions. SSRN Electronic Journal. doi:10.2139/ssrn.1929203
• Ohlson, J. A. and Juettner-Nauroth, B. E. (2005). Expected EPS and EPS growth as determinants of value. Review of Accounting Studies, 10(2-3), 349-365. http://dx.doi.org/10.1007/s11142-005-1535-3
• Ong, C. Z., Mohd-Rashid, R. and Taufil-Mohd, K. N. (2021). IPO valuation using the price-multiple methods: Evidence from Malaysia. Journal of Financial Reporting and Accounting, Advance online publication. doi:10.1108/JFRA-05-2020-0128
• Pagano, M., Panetta, F. and Zingales, L. (1998). Why do companies go public? An empirical analysis. The Journal of Finance, 53(1), 27-64. https://doi.org/10.1111/0022-1082.25448
• Paleari, S. and Vismara, S. (2007). Over‐optimism when pricing IPOs. Managerial Finance, 33(6), 352-367. doi:10.1108/03074350710748722
• Parker, D. (1999). A note on valuation accuracy: An Australian case study. Journal of Property Investment and Finance, 17(4), 401-411. doi:10.1108/14635789910282807
• Phillips, G. M. (1995). Increased debt and industry product markets an empirical analysis. Journal of Financial Economics, 37(2), 189-238. https://doi.org/10.1016/0304-405X(94)00785-Y
• Plotnicki, M. and Szyszka, A. (2014). IPO market timing. The evidence of the disposition effect among corporate managers. Global Finance Journal, 25(1), 48-55. https://doi.org/10.1016/j.gfj.2014.03.005
• Purnanandam, A. K. and Swaminathan, B. (2004). Are IPOs really underpriced? The Review of Financial Studies, 17(3), 811-848. https://doi.org/10.1093/rfs/hhg055
• Rajan, R. and Servaes, H. (1997). Analyst following of initial public offerings. The Journal of Finance, 52(2), 507-529. doi:10.2307/2329488
• Roosenboom, P. (2012). Valuing and pricing IPOs. Journal of Banking and Finance, 36(6), 1653-1664. https://doi.org/10.1016/j.jbankfin.2012.01.009
• Ross, S. A. (1977). The determination of financial structure: The incentive-signalling approach. The Bell Journal of Economics, 8(1), 23-40. doi:10.2307/3003485
• Sahoo, S. and Rajib, P. (2013). Comparable firm's P/E multiple and IPO valuation an empirical investigation for Indian IPOs. Decision, 40(1/2), 27-46. https://doi.org/10.1007/s40622-013-0008-y
• Schmalensee, R. (1985). Do markets differ much? American Economic Review, 75(3), 341-351. Retrieved from http://www.jstor.org
• Schultz, P. (2003). Pseudo market timing and the long-run underperformance of IPOs. The Journal of Finance, 58(2), 483-517. https://doi.org/10.1111/1540-6261.00535
• Slovin, M. B., Sushka, M. E. and Ferraro, S. R. (1995). A comparison of the information conveyed by equity carve-outs, spin-offs, and asset sell-offs. Journal of Financial Economics, 37(1), 89-104. https://doi.org/10.1016/0304-405X(94)00796-4
• Slovin, M. B., Sushka, M. E. and Polonchek, J. A. (1992). Informational externalities of seasoned equity issues: Differences between banks and industrial firms. Journal of Financial Economics, 32(1), 87-101. https://doi.org/10.1016/0304-405X(92)90026-T
• Spiegel, M. and Tookes, H. (2020). Why does an IPO affect rival firms? Review of Financial Studies 33(7), 3205-3249. doi:10.1093/rfs/hhz081
• Stoughton, N. M., Wong, K. P. and Zechner, J. (2001). IPOs and product quality. The Journal of Business, 74(3), 375-408. doi:10.1086/321931
• Subrahmanyam, A. and Titman, S. (1999). The going-public decision and the development of financial markets. The Journal of Finance, 54(3), 1045-1082. https://doi.org/10.1111/0022-1082.00136
• Szewczyk, S. H. (1992). The intra-industry transfer of information inferred from announcements of corporate security offerings. The Journal of Finance, 47(5), 1935-1945. doi:10.2307/2329002
• Teoh, S. H., Welch, I. and Wong, T. J. (1998). Earnings management and the underperformance of seasoned equity offerings. Journal of Financial Economics, 50(1), 63-99. https://doi.org/10.1016/S0304-405X(98)00032-4
• Turan Kurtaran, A., Kurtaran, A. and Kurtaran Çelik, M. (2018). Zayıf formda piyasa etkinliğinin Türkiye hisse senedi piyasasında test edilmesi [Prof. Dr. Harun Terzi özel sayısı]. Uluslararası İktisadi ve İdari İncelemeler Dergisi, 457-474. https://doi.org/10.18092/ulikidince.456639
• Tütüncü, L. (2020). Valuation and underpricing of Turkish IPOs. Journal of Business Economics and Management, 21(1), 157-179. https://doi.org/10.3846/jbem.2020.11927
• Welch, I. (1989). Seasoned offerings, imitation costs, and the underpricing of initial public offerings. The Journal of Finance, 44(2), 421-449. doi:10.2307/2328597
• Yücel, Ö. (2016). Finansal piyasa etkinliği: Borsa Istanbul üzerine bir uygulama. International Review of Economics and Management, 4(3), 107-123. doi:10.18825/irem.16916