Initial Public Offerings, Subsequent Seasoned Equity Offerings, and Long-Run Performance: Evidence from IPOs in Germany

Abstract

The objective of this study is to investigate the long-run performance of initial public offerings in Germany for the period from 1977 to 1995. Of particular in- terest is to examine whether underpricing and the timing of subsequent seasoned equity offerings may help to explain why some firms have substantial positive and others substantial negative long-run abnormal holding period returns after going public. We find significant empirical evidence that firms that raised addi- tional funds after an IPO through a seasoned equity offering outperformed the market. There is a significant difference in returns to the firms that had no sub- sequent equity offering. A comparison of seasoned equity offerings of IPOs and of established firms suggests that the information asymmetry is more pro- nounced for IPO firms.