Abstract
We study the long-term performance of IPO share issued in Indonesia during the 1996-2001 periods. The IPOs in this period are mostly concentrated in Finance, Trade, Property and Basic Industry & Chemicals. The cumulative abnormal return (CAR) and buy-and-hold abnormal return (BHAR) in the third year are 15.83% and negative 68.02%, respectively. The CAR and BHAR in the fifth year are negative 1% and negative 139.7%, respectively. The highest CAR for 3 and 5 years are mining industry, with 289.29% and 226.80%, respectively. The lowest CAR for third year is trade, service & investment industry, with negative 59.36% and fifth year is agriculture with negative 59.72%. The lowest BHAR for third and fifth year is trade, service and investment industry with negative 113.01% and negative 230.99 respectively. The long-run performance using cumulative abnormal return is similar with the market and cannot outperform the market.
Highlights
An Initial Public Offering (IPO) occurs when a company sells its shares to public investors for the first time
The results achieved from these studies show that Indonesian IPOs underperform the market in the long-run
The cross-sectional analysis documented in Table 5 and Table 6 are not independent towards one another. To further explain these relationships and to prove the hypotheses created by the author, Table 5 reports the results of multiple regression using the three year and five year cumulative abnormal return (CAR) and buy-and-hold abnormal return (BHAR) as the dependent variable and initial return, age, gross proceeds, and annual sales as the independent variables
Summary
An Initial Public Offering (IPO) occurs when a company sells its shares to public investors for the first time. The results achieved from these studies show that Indonesian IPOs underperform the market in the long-run. For long-run performance, the author compares returns of IPO companies with market return from Jakarta Composite Index. B. To investigate the relationship between age, gross proceeds, and annual sales of IPO companies towards their long-run performance. In answering the research questions stated above, this paper will investigate the following six hypotheses: H1: The cumulative abnormal return (CAR) of initial public offering companies in Indonesia significantly underperforms the market in the long-run. H2: The buy-and-hold abnormal return (BHAR) of initial public offering companies in Indonesia significantly underperforms the market in the long-run. For investigating the long-run market performance of Indonesian IPOs, the two measurements used are Cumulative Abnormal Return (CAR) and Buy-and-hold Abnormal Return (BHAR).
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