Pension Funds and IPO Pricing. Evidence from a Natural Experiment.
44 Pages Posted: 30 Mar 2018 Last revised: 19 Dec 2018
Date Written: April 26, 2018
We exploit a natural experiment arising from the government-forced changes to the assets under management and investment policy of the Polish pension funds. We test whether this new regulation and its resultant demand shock on the investors’ side, leads to changes in the IPO pricing and subsequent stock’s performance. We report a material and statistically significant decrease in the IPO proceeds (IPO size) in the post-treatment period equal to over 100 million PLN. We find no empirical evidence that the treatment had a significant effect on the first-day IPO underpricing or on the long-term underperformance. We conclude that demand shock resulting from the pension fund reform effectively eliminates the so-called ‘pension premium’ of higher IPO valuations.
Keywords: IPO Pricing, First-Day Returns, Long-Term Underperformance, Natural Experiment, Event Study
JEL Classification: G11, G14
Suggested Citation: Suggested Citation