Decisions on Ipo in Turbulent Times

The article refers to the problem of the IPO waves on the Warsaw Stock Exchange (WSE). In the literature there are two main proposed explanations for variation in aggregate IPO volume: the capital demands hypothesis, and the investor sentiment hypothesis. The aim of the paper is to test 1) how financial crisis translated into IPO waves and 2) which factor (capital demand or market condition) is better correlated with the IPO waves on the WSE. The main hypotheses of this article are 1) the financial crisis translated into the decrease in the number of IPOs and the value of IPO and 2) the waves of IPO are correlated with market condition. The findings of this article show that the number of IPO companies and the value of IPO issuance is correlated with the capitalization of stock exchange and GDP growth, while capitalization is correlated with GDP growth, but GDP depends on activity (optimism) of companies. Capitalization depends also on activity (optimism) of investors. In the paper, the analysis covers the years 2005 – 2015 and companies that raised new capital by IPOs on the main market of the WSE. We compared IPO volume in absolute and relative terms (IPO volume growth). The IPO volume was compared with WIG pricing (WSE index) and GDP level. The IPO volume growth was compared with WIG growth, WIG RR (WIG annual rate of return), and GDP growth. The article is organized as follows: we start with an overview of the literature on IPO reasons and waves, and then we conduct the analysis and present conclusions.