Edited by Mario Levis and Silvio Vismara
Chapter 17: Acquisitions, SEOs, divestitures and IPO performance
Since the early 1990s, when Ritter (1991) first documented the aftermarket under performance of initial public offerings (IPOs), a considerable amount of empirical research across many countries has corroborated his findings and highlighted some significant differences in performance across different types of IPOs. Post-event market underperformance, however, is not a unique feature of IPOs. A number of studies, for example, report that firms with seasoned equity offerings (SEOs) underperform in comparison to similar non-issuing firms in the three-year period following the issue (Loughran and Ritter, 1995; Spiess and Affleck-Graves, 1995; Iqbal et al., 2006). Furthermore, despite the positive initial returns for firms announcing acquisitions, there is considerable evidence suggesting negative post-event performance at least for stock-financed acquisitions (Loughran and Vijh, 1997; Rau and Vermaelen, 1998; Wiggenhorn et al., 2007).
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