The Desire to Acquire and IPO Long-Run Underperformance

31 Pages Posted: 21 Sep 2008 Last revised: 25 Jun 2010

See all articles by James C. Brau

James C. Brau

Brigham Young University

Robert B. Couch

Willamette University - Atkinson Graduate School of Management

Ninon Kohers

University of South Florida - College of Business Administration

Date Written: January 11, 2010

Abstract

We analyze a sample of 4,795 IPOs that went public between 1985 and 2003 to determine the impact of acquisition activity on long-run stock performance. After controlling for relevant factors, we find that IPOs that acquire within a year of going public significantly underperform for three-year holding periods following the first year, whereas non-acquiring IPOs do not significantly underperform over this time frame. In addition, firms that wait for more than a year after the IPO to become an acquirer do not underperform. Our event- and calendar-time results suggest that the acquisition activity of newly public firms plays an important and previously unrecognized role in the long-run underperformance of IPOs.

Keywords: Initial Public Offering (IPO), Long-Run Stock Performance, Merger and Acquisition (M&A)

Suggested Citation

Brau, James C. and Couch, Robert B. and Kohers, Ninon, The Desire to Acquire and IPO Long-Run Underperformance (January 11, 2010). Available at SSRN: https://ssrn.com/abstract=1270796 or http://dx.doi.org/10.2139/ssrn.1270796

James C. Brau (Contact Author)

Brigham Young University ( email )

TNRB 640
Marriott School
Provo, UT 84602
United States
801-318-7919 (Phone)
801-422-0108 (Fax)

HOME PAGE: http://marriottschool.byu.edu/emp/brau/

Robert B. Couch

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States

Ninon Kohers

University of South Florida - College of Business Administration ( email )

4202 E. Fowler Avenue, BSN 3403
Dept. of Finance
Tampa, FL 33620-5500
United States
813-974-6337 (Phone)
813-974-3030 (Fax)

HOME PAGE: http://www.coba.usf.edu/departments/finance/facult

Register to save articles to
your library

Register

Paper statistics

Downloads
469
Abstract Views
1,932
rank
59,243
PlumX Metrics