Performance of the initial public offering (IPO) in the Taiwanese stock market

Abstract

Considered by IPO underpricing in various markets, this article studied the IPO's abnormal market behavior in an emerging market environment such as Taiwanese stock market. The objective of this research paper is to evaluate the performance of the initial public offerings in Taiwan during the year 2010 until 2016. It investigates common outcomes of IPO studies that the underpricing in the short term and underperformance in the long run of IPOs’ performance. The sample for the study includes 161 companies listed in the Taiwan stock exchange. Our short-term performance results were consistent with studies in other markets but contrast with the results observed in other studies in the long run. Our research had resulted in IPOs on Taiwanese stock market being underpriced in the short term and, in the long term, both the CAR and the BHAR methods reveal that these companies outperform the market. This conclusion of the study also helps to conclude that the IPOs in the Taiwanese stock exchange can be used as a long-term investment tool or as a profitable speculative opportunity.