LONG-RUN PERFORMANCE OF SHARE PRICES POST-INITIAL PUBLIC OFFERINGS AND ITS DETERMINANTS IN THE NIGERIAN EXCHANGE (NGX)
LONG-RUN PERFORMANCE OF SHARE PRICES POST-INITIAL PUBLIC OFFERINGS AND ITS DETERMINANTS IN THE NIGERIAN EXCHANGE (NGX)

Summary/Abstract: This study empirically investigated the long-run performance of share prices post-initial public offerings and its determinants in the Nigerian Exchange (NGX). A sample of 36 Initial Public Offerings (IPO) issuing observations over the period 2004 to 2014 was used. Employing the standard event market adjusted buy-and-hold-abnormal-returns (BHARs) estimation approach to find out the long-run performance of IPOs, and descriptive statistics, correlation analysis, pooled OLS and multivariate panel regression technique to investigate the determinants of IPOs’ long-run performance, the results revealed a positive and significant long-run share price performance of IPOs during the period, thus, outperforming the market benchmark, the Nigerian Exchange All Share Index. This implies that investors who bought shares on the IPO listing day, who nevertheless may be earning negative returns in the short-run, up to 12 months (1 year) from the listing date, earned positive market-adjusted return thereafter. The multivariate panel regression results for the determinants of long-run performance of IPOs reveal, that initial return, IPO volatility, firm’s size, firm’s age, IPO size and market capitalization are significant determinants of IPOs’ long-run performance. The impact of market volatility is however found to be negative and weak. Against the backdrop of these findings, we recommend sound financial and investment management policies that will enhance the long-run performance of IPOs in the Nigerian stock market. In particular, policies to enhance market capitalization, firm’s size, initial return of IPOs and IPO size should be put in place, while those that will reduce the volatility of the market and IPO volatility in order to create market stability are imperative. These should be supported with optimal regulatory framework and institutional mechanisms to enhance the operations of the stock market as well as a stable macroeconomic and political environment.

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