Abstract:
Initial Public Offerings have been one of the popular ways of financing businesses in
Sri Lanka Financial Literature has shown a considerable interest on the effects of this
method of financing on share prices. Numerous studies have been found that IPOs are
normally underpriced in the short term and underperformed in the long run. This
study examined the long run performance of IPO in the Sri Lankan financial market
consist sample of 27 issues during the period 2000 to 2009. Abnormal return and
cumulative average return were calculated from daily and monthly share returns by
using the market model. Cross sectional patterns and regression model are used for
further identification. The findings shows that IPOs in Sri Lankan financial market are
significantly under performed by 32.4 % with wealth relative of 0.97. These results
are confirmed by cross sectional analyses too.
