IPO Effect: Post Event Analysis | Original Article

ABSTRACT:

Initial Public Offering (IPO) is a phenomenon when the company’s shares become available to public for the first time in the market. This is done either after incorporation or conversion of private limited company to public limited company. IPO witnessed a sharp decline in collections during 2008 quarter. Announcement of IPO may give a positive signal to the stakeholders that the company is working towards their interest. It may also indicate that the firm has ample opportunities and projects. The present study caters to the needs of shareholders and other stakeholders by analyzing the impact generated by IPOs on their returns. The study has incorporated analysis of share prices of companies initiating the IPOs between 2009-2016 and thereby computing its daily abnormal returns using CAPM. The daily stock prices of 20 companies have been taken for the concerned period from website of National Stock Exchange along with Nifty50 index values to compute market returns. t-test has been used to test for significance of abnormal returns in three event windows. Paired sample t-test has been used to find out difference in performance of IPO in varied time periods. The event study methodology has been used to find out the performance of the respective stocks since IPO announcement taking 24780 observations.