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Asian Review of Financial Research, Vol., No..
pp.1~16
pp.1~16
The Risk of IPO Firms
Yong Hyeon Kim Hansei University
Jinho Byun Ewha Womans University
Recent theoretical studies [Benninga, Hermantel and Sarig (2005) and Zhang (2005)] argue that IPO firms are less risky than non-IPO firms and thus have lower long-run returns. If this is true, IPO firms must outperform riskier firms with some frequency, especially in the bad states of the world [Lakonishok, Shleifer, and Vishny (1994)]. Applying this framework, we find that IPOs rarely outperform non-IPO firms the few instances of IPO outperformance occur more often in good times and in bad times, IPO firms typically perform worse than matching non-IPO firms. These results are more consistent with the traditional notion that IPOs on average are riskier than non-IPO firms.
Yong Hyeon Kim
Jinho Byun
Recent theoretical studies [Benninga, Hermantel and Sarig (2005) and Zhang (2005)] argue that IPO firms are less risky than non-IPO firms and thus have lower long-run returns. If this is true, IPO firms must outperform riskier firms with some frequency, especially in the bad states of the world [Lakonishok, Shleifer, and Vishny (1994)]. Applying this framework, we find that IPOs rarely outperform non-IPO firms the few instances of IPO outperformance occur more often in good times and in bad times, IPO firms typically perform worse than matching non-IPO firms. These results are more consistent with the traditional notion that IPOs on average are riskier than non-IPO firms.