European Sovereign Debt Crisis and the Performance of Dutch IPOs

31 Pages Posted: 27 Feb 2011 Last revised: 2 Feb 2014

See all articles by Andre B. Dorsman

Andre B. Dorsman

Vrije Universiteit Amsterdam, School of Business and Economics

Dimitrios Gounopoulos

University of Bath

Date Written: September 8, 2013

Abstract

We provide new evidence of the impact of the ongoing deep financial crisis on the performance of Dutch IPOs during the period from January 1990 to May 2012. The findings indicate an increasing level of underpricing as a result of the recent financial crunch. This situation is attributed to the aggressive efforts of underwriters to create demand as well as their strong focus on rewarding investors for their participation. Their actions build the soil for long-term underperformance, a conclusion supported by multiple studies in the literature. Pre-owner loyalty signals the IPOs’ quality and promotes compensation by less underpricing. Going public with the aid of a reputable underwriter does not pay off, as it does not reduce the amount of money left on the table. Consistent with the information revelation theory, we argue that the underpricing phenomenon can be largely explained by a general desire for listing.

Keywords: Initial Public Offerings, Long-Run Stock Market Performance, Market Efficiency

JEL Classification: G12, G14, G24

Suggested Citation

Dorsman, Andre B. and Gounopoulos, Dimitrios, European Sovereign Debt Crisis and the Performance of Dutch IPOs (September 8, 2013). International Review of Financial Analysis, Vol 30, 2013, pp 308-319, Available at SSRN: https://ssrn.com/abstract=1769999 or http://dx.doi.org/10.2139/ssrn.1769999

Andre B. Dorsman

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Dimitrios Gounopoulos (Contact Author)

University of Bath ( email )

School of Management,
Wessex House, Claverton Down
Bath, BA2 7AY
United Kingdom

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