The Impact of the 2007 Global Financial Crisis on IPO Performance in Asian-Pacific Emerging Markets

George Giannopoulos,Stavros Degiannakis,Teerapon Pongpoonsuksri,Andrew Holt

doi:10.4236/tel.2018.811168

Abstract

This paper assesses the comparative impact of the 2007 global financial crisis on the short and long-term performance of initial public offerings (IPOs) in the Asian-Pacific emerging markets of Thailand, China, South Korea, and Malaysia. Our results indicate that the short-term performance or underpricing of Thai IPOs increased from 19% to 44% between the pre-crisis and post-crisis periods. IPOs in each of the three other emerging markets experienced a reduction in underpricing after the financial crisis. While our results are consistent with previous IPO research, the degree of underpricing in each emerging market exceeded the levels found in studies of IPOs in developed countries. In terms of the long-term performance of IPOs, our results suggest that IPOs in Thailand, China, and South Korea performed better in the post-crisis period, while Malaysian IPOs performed worse. Our overall findings suggest that the 2007 financial crisis affected IPO performance and economic growth in each of the markets studied.

Highlights

An initial public offering (IPO) is a process by which a private company makes its first sale of shares to the general public with the assistance of an investment bank
This study investigated the effects of the 2007 global financial crisis on the relative short-term and long-term performance of IPOs in the Asian-Pacific emerging markets of Thailand, China, South Korea, and Malaysia
The results of this study suggest that the short and long-term performance of IPOs in each of the four emerging markets were significantly affected by the 2007 financial crisis

Summary

Introduction

An initial public offering (IPO) is a process by which a private company makes its first sale of shares to the general public with the assistance of an investment bank. An issuer sells its shares to an investment bank (the “underwriter”) who re-sells the issuer’s shares to the public, via a stock exchange. Many studies have focused on investigating the short-term (underpricing) and long-term performance of IPOs [2] [3] [4]. Other work has focused on fluctuations within the total volume of IPOs in relation to aggregate capital demands of private companies [5] and the valuation of IPOs using comparable firm multiples [6]

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Conclusion