Long-run Performance Research Articles

IPO Pricing in Germany and Switzerland in the New Millennium: Tests on Underpricing and Long-Term Performance

We provide an updated analysis of initial public offerings (IPOs) by Swiss and German companies after the turn of the millennium up to 2020. We compare the characteristics of initial pricing to those observed in prior studies, test conventional hypotheses about underpricing cross-sectionally, and analyze the long-run performance of IPO firms. Our sample included 72 IPOs in Switzerland and 307 IPOs in Germany. We found an average (median) underpricing of 13.27% (7.19%) for Swiss IPOs and an average (median) of 21.50% (3.7%) for German IPOs; the averages dropped to 6.45% and 5.82%, respectively, after excluding the hot-issue market in 2000. Among the cross-sectional explanations, interesting effects can be observed with respect to the bookbuilding width and transparency standard of the listed market segment, as well as the reputation of the underwriter and the value of the greenshoe option. We documented strong post-issue underperformance for holding periods up to 120 months, which were, however, only present in the Swiss sample for median, not mean, returns.

Is taxation a curse or a blessing? The case of Turkiye

This study aims to reveal whether taxes are blessings or curses based on the distinction between direct and indirect taxes. As in the past, taxation is an indispensable instrument of government policy in today’s modern state administration models. Since taxation is an inevitable phenomenon, designing an effective and efficient tax policy is an important decision process in economic development. This study will serve as a source for formulating an effective fiscal policy. Within the scope of the study, 1998/Q1 period and 2023/Q2 quarterly data for Turkiye are used. The tax curse hypothesis is analyzed using Prais-Winsten and Cumulative Fourier-frequency Toda & Yamamoto Test methods. In addition, the long-run performance of the relationship between the variables used in the model was evaluated by Wavelet Transform Coherence (WTC) analysis. The results of the analysis reveal that direct taxes have a negative impact on economic growth and thus the tax curse hypothesis is valid, while there is no tax curse in terms of indirect taxes. The study also reveals that direct taxes have a devastating effect in economies that are in the middle of the economic growth process and have a high growth rate, but this effect is not permanent and disappears after a while. The results are important in terms of guiding the formulation of government policies and the formulation of effective tax policies, especially for developing countries.

A Collection of Wisdom in Predicting Sector Returns: The Use of Google Search Volume Index

This study investigates whether the aggregate investor information demand for all stocks in a sector demonstrated in the Google search volume index (SVI) can predict the sector’s performance. The evidence shows that a sector’s abnormal SVI can predict the sector’s performance next month, even after controlling for the sector’s contemporaneous standardized unexpected earnings and lagged returns on both the market and the sector. Also found is a partial reversal in the sector’s long-run performance that is not completely consistent with the price pressure hypothesis. This indicates that some fundamental information about a sector can be captured by the sector’s abnormal SVI on a timely basis.

The Effect of PER, DER, Firm’s Age, Firm’s Size, Gross Proceeds and Public Float on Long-Run Stock Performance after IPO with Initial Return as an Intervening Variable

The purpose of this study is to analyze the effect of PER, DER, Firm’s Age, Firm’s Size, Gross Proceeds and Public Float with Initial Return as an intervening variable on the long-run performance of stocks after the IPO. The population in this study amounted to 372 stock issuers. The sample data used in this study is secondary data in the IPO period from 2018 to 2022 consisting of 155 stock issuers taken using the purposive method. The regression analysis used in this study is multiple linear regression to reveal the direct effect while to reveal the indirect effect through the intervening variable using the Preacher-Hayes Bootstrap Test. From the results of the tests carried out, it was found that DER and Gross Proceeds had a direct effect on the long-run performance of stocks after the IPO while other dependent variables had no effect. In addition, from the results of the Preacher-Hayes Bootstrap test that had been carried out, no indirect effect was found on the independent variable through the intervening variable on the dependent variable.

Accounting for technology heterogeneity in the measurement of persistent and transient inefficiency

This article tackles the problem of ignoring firm technology heterogeneity when measuring persistent and transient inefficiencies, which can lead to distorted estimates. Given that firms’ technologies exert a greater influence on long-run rather than short-run management, accounting for technology heterogeneity should prevent distortions in persistent inefficiencies and, to a lesser extent, in transient inefficiencies, which has been overlooked in the literature. Employing data from Dutch dairy farms spanning the years 2009 to 2016, I estimate random and fixed coefficients generalized true random effects models in a Bayesian framework, subsequently comparing the derived inefficiency scores. The findings indicate that average persistent inefficiency and its dispersion are inflated when technology heterogeneity is ignored, whilst transient inefficiency remains virtually unaffected. This finding is crucial to prevent firms and policy-makers from receiving misleading information about long-run performance metrics, whilst highlighting the need for future studies to account for technology heterogeneity when analyzing firms’ decisions.

Long-Run Performance Indicators of Egyptian Agriculture

Long-Run Performance Indicators of Egyptian Agriculture

Innovation and financial performance: an European evidence

Purpose- The purpose of this study is to explore the relationship between innovation and financial performance in the context of European listed companies. Starting from the initial thesis of Schumpeter, this topic attracts the interest of academics and managers because innovation is included among the factors capable of influencing the value, profitability and competitive advantage of companies. The empirical evidence in this regard appears divergent: the existing literature shows positive or negative impacts or indicates the absence of a relationship between innovation (summarised in research and development expenditure) and financial performance. Methodology- The study employs correlation analysis in order to figure out the existence of a link between innovation and financial performance. In accordance with the literature review, we use R&D expenses divided by sales as proxy of innovation and return on equity (ROE), return on capital employed (ROCE), EBITDA margin and profit margin as measures of financial performance. Data are obtained form the Amadeus Bureau van Dijk database and refers to the year 2020. Given the need to consider companies for which all the quantities mentioned are available for 2020, the final sample is made up of n. 224 European listed companies. Findings- Pearson's correlation coefficient with EBITDA margin is 0.027, with ROA is 0.016, with Net profit margin is 0.034 and with ROE is 0.025, highlighting a weak positive relationship between the independent variable and each dependent variables (that means the R&D activities will increase the profitability of firms on the same financial year). However the p-value, higher than the α=0.05 threshold, makes the correlation coefficient not statistically significant. The analysis reveals that innovation, measured by the ratio R&D espenses to sales, does not show any correlation with financial performance instantly, that is on the same financial year. Our results are consistent with the branch of studies according to which R&D activity has no effects on company performance. Conclusion- The analysis conducted does not prove the existence of a significant relationship between innovation and financial performance. A possible explanation can be found in the circumstance whereby the effect of research and development activities, as well as for all intangible assets, on the performance of companies is mainly observable in the medium-long term (what is known in the literature as the “lagged effect” of intangible assets on performance); therefore limiting the analysis to just one year does not allow us to fully grasp the impact itself. The conclusion reached is not to be understood in an absolute sense since innovation can also be measured by other indicators other than research and development expenses, such as the use of ICT, graduate employees, etc. Hence the possibility of further research developments and points of reflection considering the impact of R&D on the firm’s long-run performance and including other factors in the analysis. Keywords: Innovation, firm performance, financial performance, listed companies JEL Codes: G30, L29, O30,

The Long-Run Performance of Public Pension Funds in the US

The Long-Run Performance of Public Pension Funds in the US

Does Absence of Insider Trades Before Seasoned Equity Offerings Provide Information to the Market?

This study analyzes the interaction effect of short and long-run performance and insider trading with 1,099 seasoned equity offerings(SEOs) announced between 2004 and 2020. The major results of this study are as follows. First, insiders are net sellers prior to SEOs and the relationship between insider’s net purchase ratio and announcement effects is significantly positive. Second, the positive relationship holds only for net sell group, not for net buy group. Third, compared to firms in net sell group and net buy group, those in no trade group are marginal firms with worse operating performance, higher probability of delisting, smaller size, and lower return before SEOs, and lower ownership by largest shareholders. Fourth, regression analysis shows that announcement effect and long-run performance of no trade group is significantly more negative than net sell group and net buy group. To summarize, “dog that did not bark” effect exists in insider trading before SEOs and the absence of insider trades provide valuable information to the market.

Auditor certification and long-run performance of IPO stocks

This study establishes a significant positive relation between high quality auditors and long-run post-IPO equity performance. IPOs associated with high-ranked auditors benefit from superior information quality irrespective of underwriter rank, manifesting in significantly better post-IPO equity performance. The auditor certification effect is robust and persists longer than the underwriter certification effect. IPOs, regardless of the underwriter rank, benefit significantly from the auditor reputation effect. Further, the auditor certification effect is more pronounced: (a) when underwriter certification is weak (‘substitution effect’), and (b) in the presence of greater information asymmetry. VC backed IPOs perform significantly better; however, VC reputation has no effect, after controlling for auditor rank and underwriter certification. Our conclusions are reinforced by a battery of robustness checks, including the use of alternative methodologies to address endogeneity, audit quality proxies, performance metrics, model specifications, and validity tests.

The role of national context in the relationship between founder CEO and IPO performance

PurposeAlthough founders are often replaced with external CEOs prior to firms making IPOs, firms that do retain founder CEOs generally perform better at IPO. However, this relationship may be contingent upon context. This study aims to investigate how national context influences the relationship between a founder CEO and IPO long-run performance. The authors hypothesize that founder-CEOs will perform better in IPO firms in countries where managerial discretion, future orientation, and the level of conformity to professionalize management are high, and uncertainty avoidance is low.Design/methodology/approachUsing insights from the upper echelon and institutional theory, the authors used hierarchical linear modeling to analyze over 1,000 firms across eight countries.FindingsFounder CEOs perform best in IPO firms in a national context where managerial discretion is low, uncertainty avoidance is high and the level of conformity is high.Originality/valueThis study contributes to a growing area of cross-national IPO research in management by investigating the relationship between culture, management and IPO performance.

Long-run performance following corporate green bond issuance

PurposeThis paper aims to investigate the long-run financial and environmental performance of corporate green bond issuers, worldwide.Design/methodology/approachThe data includes 259 corporate green bond issuers from 2013 to 2020. The authors adopt the matching approach, using the nearest neighbor method to select the control firms. The event-time approach is used to examine corporate green bond issuers’ long-run stock market performance, and robustness tests are conducted using the calendar-time method. The authors examine green bond issuers’ long-run environmental performance and carbon dioxide (CO2) emissions using difference-in-differences estimations.FindingsIn contrast with the earlier long-run event studies, our results reveal that multiple-time issuers, and issuers operating in industries where the natural environment is financially material, perform financially in the long term relative to the control firms. The authors also document that corporate green bond issuers reduce their CO2 emissions, and improve their resource use efficiency and environmental performance, in the long run.Originality/valueTo the authors’ knowledge, this is the first study that looks at the long-run effect of corporate green bond issuance on firms’ stock market performance. It has the particularity to document that corporate green bond issuance is beneficial for investors and positively affects the environment. Our findings help us understand that firms do not issue green bonds for greenwashing.

Investor attention and IPO returns: evidence from Indian markets

PurposeThe regulatory design of Indian stock market provides us with the opportunity to disaggregate initial returns into two categories, i.e. voluntary premarket underpricing and post market mispricing. This study explores the impact of investor attention on the disaggregated short-run returns and long-run performance of initial public offerings (IPOs).Design/methodology/approachThe study employs regression techniques on the sample of IPOs listed from 2005 to 2019. It measures investor attention with the help of the Google Search Volume Index (GSVI) extracted from Google Trends. Along with GSVI, the subscription rate is used as a proxy to measure investor attention.FindingsThe empirical results suggest a positive and significant relationship between initial returns and investor attention, thus validating the attention theory for Indian IPOs. Furthermore, when the returns are analysed for a more extended period using buy-and-hold abnormal returns (BHARs), it was found that price reversal holds in the long run.Research limitations/implicationsThis study highlights the importance of information diffusion in the market. It emphasizes the behavioural tendency of the investors in the pre-market, which reduces the market efficiency. Hence, along with fundamentals, investor attention also plays an essential role in deciding the returns for an IPO.Originality/valueAccording to the best of the authors’ knowledge, this is one of the first studies that has attempted to explore the influence of investor attention and its interplay with underpricing and long-run performance for IPOs of Indian markets.

Do Employees Have Information on Firm’s Future Performance? Evidence from SEO and ESOP

Using a sample of 576 equity right offerings announced between 2006 and 2015, this study analyzes the wealth effects of the discretionary or no allocation of new shares to Employee Stock Ownership Plan (ESOP) and the relationship between ESOP subscription rates and the long-run performance. The major results are as follows. First, for KOSPI firms that have obligation to allocate new shares to ESOP, those that do not allocate new shares have more negative announcement effects and long-run performance than those that do. Similarly, for KOSDAQ firms that have the discretion to allocate new shares to ESOP, those that allocate have less negative announcement effects and long-run performance than those that do not. Second, the significant positive relationship between ESOP subscription rates and long-run performance means that employees have significant information on the firms’ future prospects. Third, news on the large number of shares unsubscribed by ESOP provide negative information to the market. Firms in the top quartile of ESOP subscription rates outperform those in the bottom quartile by 27.54% in the year after purchase. Overall, ESOP members’ decisions regarding allocation and subscription provide valuable information on firm’s future performance.

Industry Competition, Market Shares, and the Long-Run Performance of SEO Firms

Industry Competition, Market Shares, and the Long-Run Performance of SEO Firms

Mission-oriented policies and the “Entrepreneurial State” at work: An agent-based exploration

We study the impact of alternative innovation policies on the short- and long-run performance of the economy, as well as on public finances, extending the Schumpeter meeting Keynes agent-based model (Dosi et al., 2010). In particular, we consider market-based innovation policies such as R&D subsidies to firms, tax discount on investment, and direct policies akin to the “Entrepreneurial State” (Mazzucato, 2013), involving the creation of public research-oriented firms diffusing technologies along specific trajectories, and funding a Public Research Lab conducting basic research to achieve radical innovations that enlarge the technological opportunities of the economy. Simulation results show that all policies improve productivity and GDP growth, but the best outcomes are achieved by active discretionary State policies, which are also able to crowd-in private investment and have positive hysteresis effects on growth dynamics. For the same size of public resources allocated to market-based interventions, “Mission” innovation policies deliver significantly better aggregate performance if the government is patient enough and willing to bear the intrinsic risks related to innovative activities.

Combining estimators in interlaboratory studies and meta-analyses.

Many statistical methods (estimators) are available for estimating the consensus value (or average effect) and heterogeneity variance in interlaboratory studies or meta-analyses. These estimators are all valid because they are developed from or supported by certain statistical principles. However, no estimator can be perfect and must have error or uncertainty (known as estimator uncertainty). For a given dataset, the consensus value and heterogeneity variance given by different estimators can often differ significantly. Consequently, the choice of different estimators can affect the conclusion of an interlaboratory study or meta-analysis. However, there is no universally accepted metric for determining which estimator is optimal among a set of candidate estimators. Instead of selecting and using a single estimator, this paper proposes an estimator-averaging approach to combine a set of individual estimators. The final averaged estimator is a linear combination of individual estimators, which accounts for three sources of uncertainties including the estimator uncertainty. Monte Carlo simulations were performed to examine the long-run performance of four individual estimators and the proposed averaged estimators. A case study: the determination of the Newtonian constant of gravitation is presented, where ten individual estimators (eight frequentist weighted average methods and two Bayesian methods) are combined using the proposed estimator-averaging approach. This article is protected by copyright. All rights reserved.

The market reaction to COVID-19: European Evidence

The aim of this study is to examine the market reaction to COVID- 19 on European capital markets and its long-run performance. Using a dataset of 3,181 firms over the period 2019-2021 results show that the COVID-19 effect differs by region, country and sector. The average cumulative abnormal returns (CARs) for the European countries under investigation are -12.32%, with Austria (-19.24%), Germany (-16.31%) and Ireland (-16.63%) being the most affected countries from the pandemic over the 11-day window around the event. Sectors were affected differently, with Energy (-15.74%), as expected, being the most negatively affected in the short run. Regarding the long-term effects of the pandemic, evidence based on the 18-month buy and hold raw returns (BHR) shows increase of 41.6%, with the Utilities sector being the best performer in the Southeastern EU with BHR returns of 124.6%. Interestingly, our evidence suggests that larger, more profitable, more efficient firms with greater operating cash flow ability were those that yield the greatest long run market return performance after the pandemic.

Long-run Stock Return of IPO Firms in India: Examining Investment and Profitability Hypothesis

The finance literature has analysed several aspects of the IPO market, namely, hot issue market, initial under-pricing, and long-run underperformance. Among them, findings of long-run underperformance are particularly significant as it indicates that investors incur losses on a perpetual basis by investing in a portfolio of IPO firms. According to the OECD (2019) , during 2009–2019, the number of IPO issuances by non-financial firms in India were the third-highest globally. In the case of India, only a few studies have investigated the long-run performance of IPO firms. Accordingly, the present study fills a void in this arena. The study, along with the conventional event study techniques, deploys the Fama-French Five-Factor model for analysis of long-run underperformance. The study estimates investment and profitbility factors for India following the methodology illustrated by Fama-French (2015) . The study finds that long-run underperformance by the IPO firms is not absolute but specific to the sample and methodology used for analysis. It also finds that underperformance is prevalent in high IPO volume years. The regression results for IPO firms as portfolios in the capital asset pricing framework do not show any long-run underperformance. This finding supports the conclusion that the long-run underperformance by IPOs reported in the previous studies results suffers from sample and methodology bias. The analyses in the five-factor framework show the plausibility of higher investment by IPO firms resulting in lower market return. IPO firms make above-industry-average capital expenditure, and their profitability converges with the industry after issue.

Vapor-phase dehydrogenation of 1-decanol to decanal over Cu/SiO2 catalyst prepared by organic additives-assisted impregnation

Silica-supported copper (Cu/SiO2) catalysts were prepared by impregnation assisted with organic additives and employed as an efficient catalyst for oxidant-free vapor-phase dehydrogenation of 1-decanol to decanal. The XRD, N2O titration, and TEM analyses showed that the utilization of organic additives generated Cu/SiO2 catalysts with better Cu dispersion and smaller particle sizes, which led to a significantly larger Cu surface area than the Cu catalyst prepared without organic additives. Among several additives-assisted Cu/SiO2 catalysts tested, the Cu/SiO2 assisted with the 12-crown-4-ether (12C4) gave the highest catalytic performance for dehydrogenation of 1-decanol to decanal. Compared to the unassisted Cu/SiO2 catalyst, the Cu catalyst prepared with 12C4 had a higher formation rate with significantly better long-run performance. The dehydrogenation activity, i.e. the formation rate of decanal, was simply proportional to the copper surface area of catalysts.