Allocation of Funds from Public Offerings of Shares (IPO's) in Brazil and Stock Returns

Abstract

This study analyzes the relationship between the allocation of funds raised in a public offering of shares and abnormal profitability on the first day of trading. The objective is to identify whether the allocation of resources can be considered for the decision-making of investors. To measure the data, multivariate analysis was used, and the data survey considered the information from the prospectuses of the public offers and the announcements for the closing of the offers, between January 2007 and December 2011. Two hypotheses were tested: one in relation to allocation of resources and another in relation to the group of investors participating in the offer. The results show that there is no relationship between the allocation of resources and the abnormal returns of companies. However, for investors who are part of the company's management, they were related to abnormal stock returns on the first day of trading.