Long-run stock performance after intial public offerings and seasoned equity issues in the German capital market

We estimate the long-run stock performance after intial public offerings (IPOs) in the German capital market with a larger sample than prior studies and alternative benchmarks (the equally and the value-weighted market portfolio, size portfolio and matching stocks). In addition we present the first results on the long-run performance after seasoned equity issues (SEOs) in Germany. We conclude that size portfolios and matching stocks are better benchmarks than market portfolios. Using buy-and-hold abnormal returns, we estimate that German stocks involved in an IPO or in a SEO, on the average, underperform a portfolio consisting of stocks with a similar market capitaliziation by 6 % in three years. This is considerably les than underperformance after IPOs and SEOs in the US Market reported by Loughran/Ritter (1995) and the underperformance of 1988-1990 IPO cohort discussed by Ljungqvist (1997) disappears when the abnormal performance estimate is based on size instead of market portfolios.