Short-Run and Long-Run Performance of IPOs: Evidence from Taiwan Stock Market

Abstract

This paper studies the aftermarket stock performance of IPOs in short-run and long-run, and examines whether the long-run underperformance exists in Taiwan stock market. This paper applies the measure of expected skewness to verify that the highly expected skewed IPO firms are overpriced and experience the long-run underperformance. We find that IPO firms are underpriced 48.54% and severely underperform from three to five years in comparison to the reference portfolios. Skewness is reported to be positively related with the underpricing level of the first day. However, our findings suggest that this skewness measure can't explain for the long-run phenomenon of IPOs.