IFRS Adoption and performance of Dutch IPOs

Abstract

We estimate both initial underpricing and long-run stock performance for 138 Dutch IPOs that were listed during the period 1990–2009 making use of widely used BHAR and CAR and of alternative benchmarks (CAPM, FF3F, FF4F, Calendar time) over 36 months of secondary market performance. Findings align with international evidence and reveal long-term underperformance while they differentiate as this underperformance appears only few months after listing. Measuring these returns in calendar time, we find statistical significance with several of the benchmarks employed. Using buy and hold abnormal returns, we confirm low underpricing level of Dutch IPOs. Cross-sectional regressions of short and long-run performance disclose several significant factors. Underwriter’s reputation and market (hot) condition proves to be significant in both short and long term cases. Opposite to many studies we attribute long-run underperformance to the IPO listed during cold market periods. Results associated with pricing during the “hot IPO period” indicate better long-term (3-year) performance

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