The Long-Run Performance of Indonesian Initial Public Offerings (IPOs)

Abstract

Previous studies found that long-run share price performance of Indonesian initial public offerings (IPOs) underperformed. My research gives new evidence that the long-run performance depends on the methods used. In this study, I examine the long-run performance for up to three years after listing of a sample of 101 firms that made initial public offerings during the period 1999 to 2005 in Jakarta Stock Exchange . Insignificant underperformance is found for equal-weighted cumulative abnormal returns (EWCARs) and value-weighted cumulative abnormal returns (VWCARs). Significant underperformance is found for equal-weighted buy-and-hold abnormal returns (EWBHARs). Significant outperformance is found for value-weighted buy-and-hold abnormal returns (VWBHARs). As I attempt to explain the long-run performance of Indonesian IPOs, I find that initial returns, post-IPO institutional ownership, and age of the firm are long-run performance-related.

Keywords: Initial public offerings, long-run performance, equally-weighted returns, value- weighted returns

JEL Classification: G32