The short term and long term performance of Initial public offerings is largely linked with the under pricing of shares at the time of Initial Public Offering and under performance of the firm in a period of three to five years. Previous studies have shown that under pricing of shares is affected by various elements such as reputation of underwriters, management and age of the corporation. The long run performance of the corporation after Initial Public Offering is linked to elements such as growth of the company and the earnings compared to other firms which have not gone public.

Several researches in this area have focused on various countries and stock exchanges to conclude that short term and long term performance of Initial public offerings are linked with factors such as the reputation of underwriters, growth of the company after Initial public offering, shareholders’ expectations about performance, pricing of shares in Initial public offering, age and reputation of the corporation and the comparative growth in terms of sale before and after the Initial public offering. The research carried out by Carter, Dark and Singh provides a significant basis for the work being done in the area of Initial Public Offering performance with reference to initial returns and long run returns (Carter, Dark, & Singh 1998). Another research carried out by Alvarez and Gonzalez indicates the long run performance of Initial public offerings in the Spanish capital market during the period 1987-1997 (Alvarez and Gonzalez 2001). Frederikslust and Van der Geest in their research analyze the initial return and long run performance of private equity backed Initial public offerings on the Amsterdam Stock Exchange during the period 1985-1998 (Frederikslust and Van Der Geest 2001). This research provides results similar to the study carried out by Alvarez and Gonzalez. A more recent study carried out by Zaluki, Campbell and Goodacre in the Malaysia Initial Public Offering market and discusses the share price performance in less developed markets and concludes that there is an over performance by shares in developing markets which is quite opposite in developed markets (2007). This particular study discusses share price performance specifically instead of the overall performance of earnings and growth of the company. It also provides a new perspective of the performance of Initial Public Offering in terms of developing markets and share prices instead of studying the overall performance of companies in developed markets. Other studies have been conducted by researchers like Guner, Onder and Rhoades to analyze the performance of Initial public offerings in emerging markets (2004). Almost all research studies carried out to evaluate the short and long run performance of Initial public offerings have yielded similar results and conclude that the factors which determine the performance of Initial public offerings include the under pricing of shares, reputation of underwriters, age of the corporation and rate of growth as compared to other corporations.

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