Testing the Robustness of Long-Term Under-Performance of UK Initial Public Offerings

We re-examine the evidence on the long-term returns of IPOs in the UK using a new dataset of firms over the period 1985-95, in which we compare abnormal returns under a number of alternative benchmarks. Previous work has identified that IPOs underperform a market index, and the purpose of this paper is to examine the robustness of this finding in relation to a number of alternative benchmark portfolios. We find that there are negative abnormal returns to an IPO such that a one pound investment is worth less than 85 pence after three years. This finding is similar across benchmarks.

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