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The Operating and SharePrice Performance of Initial Public Offerings: The UK Experience

29 Pages Posted: 24 May 2005  

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance

Stefano Paleari

University of Bergamo - SIGE Sezione di Ingegneria Gestionale

Silvio Vismara

University of Bergamo

Date Written: January 5, 2005

Abstract

We study the post-issue operating performance of UK Initial Public Offerings. Using several measures, we find that the performance of firms going public on the Official List deteriorates significantly after the issue. On the contrary, IPO-firms on the Alternative Investment Market (AIM) use the IPO as springboard for growth without sacrificing their profitability. The AIM is, indeed, the first market where operating performance is not found to be declining after the IPO. The listing on the AIM does not affect significantly the leverage of the firms, but gives the opportunity to raise fresh funds, both at the time of the initial offering and through further (debt or equity) capital raisings. Conversely, the permanent decrease in leverage after the IPO on the Official List characterizes the flotation on this market as a mean to rebalance the firms' capital structure.

Keywords: Initial Public Offerings (IPOs), going public, operating performance, long-run

JEL Classification: G32, G14

Suggested Citation

Khurshed, Arif and Paleari, Stefano and Vismara, Silvio, The Operating and SharePrice Performance of Initial Public Offerings: The UK Experience (January 5, 2005). Available at SSRN: https://ssrn.com/abstract=727704 or http://dx.doi.org/10.2139/ssrn.727704

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance ( email )

Crawford House
Oxford Road
Manchester, M15 6PB
United Kingdom
+44 0 161 275 4475 (Phone)
+44 0 161 275 4023 (Fax)

Stefano Paleari

University of Bergamo - SIGE Sezione di Ingegneria Gestionale ( email )

Via Marconi 5
24044 Dalmine, Bergamo
Italy
+39 03 520 52340 (Phone)
+39 03 556 2779 (Fax)

Silvio Vismara (Contact Author)

University of Bergamo ( email )

Via Marconi 5
24044 Dalmine, Bergamo
Italy
00390352052352 (Phone)
0039035562779 (Fax)

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