After market returns of initial public offering the case of Viet Nam

Abstract

Initial public offerings (or IPO) are usually hot topic in financial world. This thesis is to examine return behavior after IPOs in short-run and long-run on Vietnam stock market by using abnormal returns to measure the stocks return. Market Efficiency hypothesis is applied to test the long-run performance. Furthermore, given a regression model, the thesis also aims to determine which factors most impact on the stock’s performance aftermarket. The thesis uses IPO price and trading price data from listed companies on Ho Chi Minh City Stock Exchange (HSX) and Hanoi Stock Exchange (HNX) in the period 2001 – 2013. The results showed that most of these companies are undervalued average of 63.5% in the first trading day after IPO events. Then, stock returns are negative due to investors’ taking profit. In the longterm, average rate of return of stocks are higher than the Vietnam’s benchmarks (VN – Index and HNX Index) within one year, two years and three years after the IPO. In addition, the study shows that in short-term, the abnormal return of IPO events in the first trading day affected by firm size, listing exchange and industry. But in the long-term, one year, two years, and three years after the IPO, there are no variables have statistical significance. It implies that the accumulated abnormal returns were not affected by the model’ factors.