Pension Funds and IPO Pricing. Evidence from a Quasi-Experiment.

69 Pages Posted: 30 Mar 2018 Last revised: 9 Sep 2020

See all articles by Lukasz Langer

Lukasz Langer

University of California, Berkeley - Haas School of Business

Piotr Langer

Imperial College Business School

Paulina Roszkowska

Cass Business School; Warsaw School of Economics (SGH); Hult International Business School

Date Written: April 26, 2018

Abstract

We exploit a quasi-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 the subsequent stock’s performance. We report material and a statistically significant decrease in the IPO proceeds (IPO size) in the post-treatment period equal to over 107 million PLN (34 million USD). 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 the demand shock resulting from the pension system reform that primarily aimed at solving fiscal problems effectively eliminated the so-called ‘pension premium’ of higher IPO valuations. Thus, it indirectly impaired companies’ power of raising money in the public stock market. Furthermore, we report a decrease in the average first-day IPO returns among big issuers that is consistent with the book building literature.

Keywords: IPO Pricing, First-Day Returns, Long-Term Underperformance, Natural Experiment, Event Study

JEL Classification: G11, G14

Suggested Citation

Langer, Łukasz and Langer, Piotr and Roszkowska, Paulina, Pension Funds and IPO Pricing. Evidence from a Quasi-Experiment. (April 26, 2018). British Accounting Review, 2020, Available at SSRN: https://ssrn.com/abstract=3152562 or http://dx.doi.org/10.2139/ssrn.3152562

Łukasz Langer

University of California, Berkeley - Haas School of Business ( email )

PhD Program
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Piotr Langer

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Paulina Roszkowska (Contact Author)

Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Hult International Business School ( email )

37-38 John St, Holborn
London, WC1N 2AT
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
97
Abstract Views
948
rank
320,810
PlumX Metrics