Study of IPO performance and institutional ownership (Exchange of Tehran)

Transcription

1 Journal of Scientific Research and Development 2 (6): , 2015 Available online at ISSN JSRAD Study of IPO performance and (Exchange of Tehran) Elahe Avazzadeh * M.A of Financial Management, Yazd University, Yazd Iran Abstract: The aim of this study was to evaluate the effect of intuitional on the performance of companies listed on Tehran stock exchange. The IPO s binary abnormalities on price and is long term. Mal functioning causing many researches and studies while the limited number deals with the effect of IPO s investors on fundamental investors. From previous studies, we find that the retail price was from the largest fundamental investors. While these distributors have experienced the long term wrong performance and make the commercial conscious hypothesis uncertain. These findings accompanied by severe reactions from the information flow in the IPO market. High level of fundamental desires brings this awareness to excursive the distributor s base price. Over time, market reforms lead to long term and improper performance. Findings of our studies show the role of IPO organizations differently; to make it as a valuable source of price, and organizations could be a weakened force in what is almost an uncertain and disturbed consequence. Required data has been extracted from financial statements of 78 companies in Tehran stock Exchange from 2003 to A multiple regression model was used in this study. Research shows that stocks with high, will experience high initial efficiency and longer term performance. Overall, the results suggest that appositive and meaning full relationship between and firm s performance. Key words: Institutional ; IPO performance; Initial returns; Iinitial offering; Change in 1. Introduction * Before the event of very large companies in the late eighteenth century the owners, administrators and man raggers who possess, but with the separation of from management, the creation of stocks and professional manager s stock company, a new approach was introduced as a social phenomenon. This caused a conflict between managers and owners. Stock holders may vary in different countries, but stock holders could have different effects on the performance of companies as well as the company, data reflection in market and in formation asymmetry. Thus, with respect to the way of monitoring company s man agent performance may also vary. Here the most interesting, is the growing presence of investors between the owners of holding company and the influence of active presence of this group regarding the governance of organizations as well as their performance. Institutional investors have the potentiality to influence the managers activities directly and in directly through exchanging their stock and their influence directly or indirect is very important. Institutional in vectors have incentives for monitoring and improving the performance of their financial reports. Among these drivers can be noted * Corresponding Author. that he financial statements are an important source of information about company, or the investors in the analysis of accounting information are more capable than an individual investors. Then we expected to existence of a logical relationship between these groups of investors and the firm s performance. Generally several abnormalities consistent with bid basic public offer. The first is the price of shares which is related to common stock of Supplier Company that have casually higher price than the bid price on underwriting of IPO. In this study, the relationship between in the structure of company and their performance are examined. 2. Research literature Refills of IPO are under consideration for more than fifty years (SEC, 1963; Rely, 1973; Aybatsun, 1974; Ritter, 1987; lagron and Witter, 1995). The review of us stock market and the security commit lee in 1963 about guaranteed markets was one of the first studies on the formation of IPO Refills. By examining a sample of the 1671 IPO during , SEC (1963) found that %79 of IPO immediately after the distribution has positive profit. In addition, the average price was above %20.SEC report, is one of the first series of investigations related to the refills of IPO (as A stall and Karlie, 1970; Reilly, 1973; Ritter, 1987; logran 178

2 and Ritter, 1995).The continuity of the IPO s refill was compared with the magnitude of the refill. IN terms of money, Ritter (2008) estimated that from 4733 IPO sample, distributor companies leave that total amount of 102/7 billion dollar in agenda. This is a% 22/4 wonderful sample of total revenues. More over Ritter and logra (2004) estimated that this remained money in agenda is approximately equivalent to three years profit for distributors. Effective and efficient Ritter s article in 1991 about the distributors improper and long-term performance,he found that in three years public distribution,1526 company in their improper performance in a series of companies in term of size and industry compared by %27/4. Although the magnitude of IPO s improper performance represents the fundamental and large fluctuations overtime and industries, but empirical evidence indicates a continuation of weak and long term performance. Integration of long term price winning and improper performance, make IPO as an interesting research topic. Sites not surprising that the vast flood of studies has been devoted to the study of IPO. While few studies deals with the reason of direct impact of organizational investment on IPO s abnormalities. The company was interested in IPO combined with empirical evidence that show companies with Characteristic feature of ability, have a significant impact on capital stock price abnormalities(nancy nagger and siyas,1999)and the NYSE(like January effect)and make this survey not only reasonable but necessary. This article is limited to the study of their relationship between the two main anomalies in IPO. Agra ell and Ravioli (1990), welch (1989), Rajan and servos (1997) and Alvez and Gatrls (2005) are among the exceptions. Agravell and Ravioli (1990) obtained evidences that indicates the presence of trends to IPO market and early high benefits and low IPO performance, this means that active markets act by tendencies on certain invest and stock. Fundamental and proposed initial public offering having the advantage of availability of information in the organization, is considered as an acceptable and good look. Several studies have shown that fundamental organizational investors apparently has the know ledge of the relevant and coordinated decisions.(cszyk et al., 1992; Alangar Batala and Raw, 1999).For example, Alan Garand his team in 1999 showed that companies that had a high level of tend to lower share price reflection in share benefits changes. Empirical studies also provided substantial support for informed trading hypothesis (Branermyer and Nagel, 2004; kee and patron, 2004). Kee and patron (2004) obtained good information which allowing the active investors to predict chance and opportunity in repeated high earnings. In this way, these organizations are able to prevent any negative repercussions on the value of the income statements. While there is a few studies about the direct impact of organizational investment on existing IPO. Recent works devoted much attention to the ways in which organizational behavior is due to the contribution of the authors at IPO s Shares (Henley and helm in 1995, Agaroll, pernhala and pure in 2002, Behmer and fishy in 2005). Henley and Wilhelm(1995)and Agaroll and his team (2002) found that investors are able to take advantage of remarkable contribution of minor authors, Despite conclusive evidence in the previous studies, we still believe that the initial public offering have a power on supplying severe test of informed trading hypothesis.ipo s under writings at first can have an extreme profits, while still being profitable to remember that refill of IPO not always consistent in all companies or all the time. For example, the primary profit of Ballely, lee and Walter in (2004) of 419 Australian IPO samples was varied from% 66 to% 734. Although field and larn in 2005 showed that over 100 IPO samples over %1000 in the first three years of acquisition, Also the authors found that up to 100 IPO sample have a profit of %-99 over the same period. More under writer can be addressed with loss winners. loss winners hypothesis stated that IPO s were below cost, for corporation non-informed investors to applying inexperienced investors buying IPO(Rock 1986).the theory is that investors should be aware of low cost IPO s which leading to dominate and distributing. On the other, informed investors should avoid of under writing in high price proposals. As an experienced investors retreat from the market, inexperienced investors also received a heavy defeat at the time of receiving high improper shares from high price suggestions. Despite the fact that most of IPO s are of low price, just experienced investors can take a high profit of IPO s. Skilled and experienced, the corporation of interests in a IPO, should be proportionate to the benefits expected to be underwritten and distributed.refills IPO should attract the desire of experienced investors such as financial institutions. Similarly, an equal distribution of prices should receive less attention from experienced investors. 3. Research hypothesis Based on theoretical issues arising in relation to the effect of, is designed as follow: H 1 : In the presence of informed trading hypothesis should be a positive relationship between the level of at the time of the initial distribution and initial profits for the investors to be there. H 2 : In the presence of informed trading hypothesis should be a direct and positive relationship between the level of at the time of the initial distribution and long-term profit distribution to be there. H 3 : If you have no idea, should exist a positive relationship between the levels of at the time of the initial distribution of primary income (initial public offering). 179

3 H 4 : If the wave theory, we should have negative relationship between the level of at the time of the initial distribution and the income distribution. 4. Research methodology 4.1. Information Data This paper examines the set of Initial public offers (IPOs)in Iran stock Market in 2003to 2013.information about the benefits of overall profitability index (RI) were calculated and arise from the Data stream. This paper make it possible to use a constant set of daily property information was provided by the Iran s stock Exchange. Level of of the Iran s stock market is calculated Selected option and its properties Primary data collection includes all initial public offerings between 2003 and 2013.In this selected option we have not chosen the supplier which have not all parameters. By restricting the sample stock, in all ordinary indicators we tend to study the IPOS with high economic importance and the possibility of attracting the investors by large enough stocks the other criterion for inclusion in this instance is that we have a level of and register our proposed specification (e.g., the overall Distributed huge distributed huge distribution of the stuck). The final sample consisted of 68 initial public offering in Iran. Table 1 includes a graphical statistics for this sample. Study of table1.shows that average earning mas about 125 million Dollar. Note that standard deviation about the 258 million dollar shows that this sample included distribution in a wide range of market. Other ideal samples in the average are that distributors suffer from long term poor performance which related to the previous studies of Iran and its margin. Table 1 contains descriptive statistics for the IPO S 68 activity in this sample. Corporate is defined with the company s overall IPO which managed by investors. Definition of investor, including all shares in accompany that is not owned by investors. Data are reported as a percentage of the sum. Cross income size distribution measured by the millions. Bid price is the price at which shares are distributed in IPO. General distributed stock represent the total number of issued shares in the offer.250 CAR is 250 abnormal profit added days for the company s distributing. While 500 CAR is the abnormal profit which is added to the previous so day. IN exercise of abnormal earnings, profit participation distributor measure all the routing in the period in question. Variable Level of Size Total shares issued The price Of shares Car250 Car500 Table 1: Descriptive statistics for the IPO S 68 activity in this sample Mean s. d max 75% median 26.28% 22.03% 97.50% 36.49% 17.04% $ 2.31$ 19.00$ 1.86$ 1.15$ 0% 58% 132% 30% 2% 12% 79% 189% 60% 8% 25% 8.65% $ -24% -30% min 0.48% $ 179% 217% We focus our attention to the average level of, which is about 28/6%. This well below the average contribution of 170% of an organization that had been reported in previous research. Very high level of personal share in Iran leads to significant difference in the average. 5. Research methodology To examine the hypotheses, two different methods have been used. At First we Study this thesis at the portfolio level. Our portfolio is based on the IPO and the fundamental property. We believe that the use of portfolio creates a realistic view of performance analysis of a Fundamental investors, this is especially is correct in determining the validity of the informed trading hypothesis. After the compilation of portfolio s Analysis, we study the impact of fundamental property level at the organizational level. We investigated the effect of margins of these variables on both short-term and long term performance of the issuer. Cumulative returns To analyze the firm level, we measure stock returns released on enrollments. This measure reflects an initial yield which is often referred to the refills in IPO s literature. The primary outcome is measure by the following formula. Primary return = h To study the long-term performance we estimate the abnormal returns to measure the performance of the diffuser. Abnormal returns, is the sum of the daily abnormal returns during the event. The results: 180

4 General primary comments: secondary reason for the price of Table 2 shows the initial yield of the stock is issued. Column 1 shows that the average initial return is statistically and economically, has a significant level of 37/35% for 68 IPO. Table 2 classified transactions on 3 groups based on the fundamental property on the classification of these nodes, transactions IPO, are classified in three categories. Type Transactions paragon The low level of High level of Differences in Number of Transactions Sample Table 2: Initial yield of the stock Average Institutional On Issue Date 26.28% 6.12% 51.58% Initial Return 37.35% (t = 1.69) 17.52% (t = 2.85) 70.64% (t = 1.13) 53.12% Initial Abnormal Return EW(0,3) 38.88% ( t = 1.75) 17.79% (t = 0.96) 70.93% ( t = 1.13) 53.14% Table 3 reports, the impact of the relative asset on performance of an IPO firms from 2003 until2013, Institutional are defined by all shareholders of IPO firm hold. Definition of fundamental investors, including all stock holders in a company which is not recognize as individual investors. That table classifying the transactions in two groups: IPO trading by firms with lower and IPO firm with high level of. Table 3: Analyzing the effect of relative asset on IPO Paragon Inc. properties Lowest Lowest Fundamental property 6.12% 20.62% size Initial back 37.35% 17.52% 23.29% supply 1.64$ 2.24$ 1.14$ Number of companies Medium highest 51.84% % 1.94$ 23 Table 4 represents the impact of investor assets in the company s initial offering Institutional is defined as 2005 until Institutional stock in an initial public offer of the company is held by investors is defined. This definition covers instructional investors stock in a company which does not belong to personal in vectors. This table classifies transactions into two groups: initial public offerings by companies with low institution transactions and initial public offerings with high levels of. Companies with high initial public offering firms with high levels of and vice versa. Type of Transactions Table 4: Analysis of the effects of assets in initial public offerings Model 1 Dependent Variable CARi [1,500] Average Institutional Ownership Long Run Abnormal return Number of Transactio ns Issue Date 1 year post listing 2 year post listing Paragon % 41.16% 43.79% Lower level of Higher level of % 31.43% 35.79% % 58.38% 59.94% EW{1,250} -0.37% (t = ) 17.52%*** (t = 2.85) % (t =-1.17 ) EW{1,500} 11.99% (t =1.24 ) 51.41%*** (t =3.33) % (t = -1.48) Difference %* 72.83%*** 181

5 Table 5 shows the results of linear regression models for long-term performance of companies that had initial public offerings are not reported. The dependent variable is the long-term share price performance of initial public offerings in the period after initial public offerings. Two factors is a after an initial public offering and 500 business days after the initial public offering. Table 5: Results of linear regression models for long-term performance of companies Model 1 Model 2 Dependent Variable Dependent Variable Dependent Variable CARi [1,500] CARi [1,500] CARi [1,500] Coefficient p-value Coefficient p-value coefficient p-value Type of Transactions * (0.0655) Change in ** (0.0440) size (0.5295) Bid (0.2480) Total issued shares (0.5691) R-square Table 6: Linear Analysis of long run performance of initial public offerings ** (0.0434) Change in (0.1041) Early returns ** ( ** Initial Efficiency *** size (0.6522) Bid (0.2372) Total shares proposed (0.6667) R-square (0.3324) (0.1754) (0.0179) (0.0071) (0.2247) (0.6815) (0.2332) 6. Results of this study Despite a series of investigations, we have not censuses on the price performance of initial public offerings and exporters and the poor long term performance. IN this study we try to determine the initial public offering by puzzle investigates the influence of investors in the initial public offering. At present, major investors in the world s stock markets, are investors in the initial public offering. Based on expectations, the results show that investors are able to yield a higher initial yield. The initial public offering with high by more than 53% better performance than their counter parts with low. In long term, although exporters who have invested too much market fundamental absorption above and below the initial public offering and their counterparts they are doing. A number of previous studies involve that appositive relationship between price and long term exporters performance. In other words, exporters who have experienced the highest initial returns, they tend to experience the greatest long term performance, however our inference show that only shares with high level of who experienced early returns and long term performance, and high level presence of investors in the initial public offering herding behavior of investors and investors participation played an important role in the initial public offering. References Aggarwal, R,N.R.Prabhala and M.Puri. (2002). Institutional allocations in initial public offerings:empirical evidence. Journal of Finance 57, Aggarwal,R. (2001). Allocation of initial public offerings and flipping activity. Journal of Financial Economics 68(1), Aggrawal R,R.Leal and L.Hernandez. (1993). The Aftermarket Performance of Initial Public Offerings in Latin America. Financial Management 22, Aggrawal R.and P.Rivoli. (1990). Fads in the Initial Public Offering Market?. Financial Management 19, Alangar,S.,C.Bathala and R.Rao. (1999). The effect of interests on the information. Journal of Research22,

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