The initial and aftermarket performance of IPOs in an emerging market: evidence from Istanbul stock exchange

This paper empirically analyzes the initial and after-market returns for the Turkish initial public offerings (IPOs) to provide an emerging market case of international evidence on performances of IPOs. The sample consists of 163 firms listed and traded on the Istanbul Stock Exchange during the period of 1990–1996. The results show that the Turkish IPOs are underpriced on initial trading day on average of 13.1%. The initial underpricing is 11.7% for industrial firms, 15% for financial firms and 17.6% for others. In terms of sub-sectors the highest return is obtained in Tourism/Transportation group, while the lowest return is observed in Machinery/Equipment group. With the exception of Banking group, all of the sub-sectors experienced statistically significant initial underpricing. The investigation of factors influencing the initial performance show that size of issuer, rising stock market between the date of public offering and first trading day, institutional ownership, and self-issued offerings are significant determinants of underpricing. © 2000 Elsevier Science B.V. All rights reserved. JEL classification: G14; G15; G24