A Study of IPOs Aftermarket Performance: Evidence from the Bourse Régionale des Valeurs Mobilières (BRVM)

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Joël Franck, L. T., & Robert, T. S. (2015). A Study of IPOs Aftermarket Performance: Evidence from the Bourse Régionale des Valeurs Mobilières (BRVM). Journal of Business Management and Economics, 3(5), 16–28. https://doi.org/10.15520/jbme.2015.vol3.iss5.103.pp16-28
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Abstract

This work is an empirical contribution to the study of the initial and the aftermarket performance of Initial Public Offerings (IPOs) on emerging African stock markets. We determine the short-term performance of IPOs on the BRVM and surround its evolution on the middle/long run. So, we use the raw initial returns and the adjusted initial returns methods to assess the short-term performance. Then, we determine the middle/long-run performance through cumulative abnormal returns (CARs) and buy-and-hold abnormal returns (BHARS) (abnormal returns are both adjusted to the market index and to the market model). By applying those methods to the BRVM IPOs data in the period between September 16th 1998 and December 31st 2011, we draw two main conclusions. First of all, we find out that  BRVM IPOs present a great initial underpricing during this period and that, the adjustment of these initial returns for a given market index return affects them negatively. Then, the holding of these stocks on the middle/long run following both an active investment strategy (cumulative approach) and a passive investment strategy (buy-and-hold approach), lead to their significant underperformance.

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