The long-term operating performance of IPOs


Over the past several years initial public offerings (IPOs) have, once again, become very popular. This period can be characterized as a period of a high number of IPOs, a large amount of capital raised through them, and a very high investor interest in them. These characteristics are typical of a "hot" IPO market. During this latest period of IPO boom, the number of technology IPOs and their initial return increased significantly. But do such IPOs reward investors in a long run? Many previous studies indicate that IPOs generate high initial returns, significantly under perform the market over the long term, and exhibit declining operating performance in the post-IPO years. This study examines the post-IPO long-term price/return performance and operating performance of a portfolio of technology IPOs. The sample of IPO firms is from those that went public in 1995. The returns on the price weighted portfolio and on the equally weighted portfolio are measured to determine the price/return performance from January of 1996 till December of 1999. These portfolio returns are compared to the returns on the NASDAQ index for a comparable time period. Several variables indicative of the portfolio's operating performance such as operating cash flow, sales, total assets, and capital expenditures are analyzed over a four-year period following the IPO. Results show that the sample firms grow rapidly in terms of sales, capital expenditures, and total assets. Their operating performance, however, declines over time. This is associated with declining price/return performance over the four-year period. Results of this study are consistent with earlier results reported by other researchers.


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Thesis Completion





Modani, Naval


Bachelor of Science (B.S.)


College of Arts and Sciences

Degree Program



Arts and Sciences -- Dissertations, Academic;Dissertations, Academic -- Arts and Sciences







Access Status

Open Access

Length of Campus-only Access


Document Type

Honors in the Major Thesis

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