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Is the success of an issuer an investor success? Evidence from Polish IPOs

Author

Listed:
  • Bogumila Brycz

    (Department of Management Systems, Wroclaw University of Technology, Wroclaw, Poland)

  • Tadeusz Dudycz

    (Department of Management Systems, Wroclaw University of Technology, Wroclaw, Poland)

  • Michal J. Kowalski

    (Department of Management Systems, Wroclaw University of Technology, Wroclaw, Poland)

Abstract

This article examines the factors that determine IPO success in raising equity capital, and how this success translates into investor success. The study is based on a sample of IPOs on the Warsaw Stock Exchange from 1998 to 2011. We find that pre-IPO profitability is a strong and positive signal for investors that translates into a higher offer price and therefore determines the success of the issuance. However, companies with high IPO success do not provide investors with better performance after going public, nor do they provide protection before the common phenomenon of long-term underperformance. A large-scale value migration between shareholders occurs in companies that achieve IPO success. The investor belief that pre-IPO profitability is a signal of the future earnings potential of an IPO firm indicates that they probably use simple heuristics and have a representativeness bias.

Suggested Citation

  • Bogumila Brycz & Tadeusz Dudycz & Michal J. Kowalski, 2017. "Is the success of an issuer an investor success? Evidence from Polish IPOs," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 17(1), pages 57-77.
    • Handle: RePEc:bic:journl:v:17:y:2017:i:1:p:57-77
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    File URL: http://www.tandfonline.com/doi/full/10.1080/1406099X.2017.1308781
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    Citations

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    Cited by:

    1. Tadeusz Dudycz & Bogumiła Brycz, 2021. "Why the Par Value of Share Matters to Investors," IJFS, MDPI, vol. 9(1), pages 1-20, March.
    2. Dorota Podedworna-Tarnowska, 2023. "Listing switch and financial performance of companies: evidence from the Warsaw Stock Exchange," Central European Management Journal, Emerald Group Publishing Limited, vol. 31(4), pages 479-494, November.
    3. Katarzyna Predkiewicz & Marek Pauka & Paweł Predkiewicz, 2021. "IPO Success of High-Technology Companies," European Research Studies Journal, European Research Studies Journal, vol. 0(3B), pages 799-816.

    More about this item

    Keywords

    Equity issue; signals; IPO; initial public offering; Warsaw Stock Exchange; profitability; WSE;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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