Performance of Initial Public Offerings : The Evidence for Switzerland

We examine the underpricing and long-term performance of a broad set ofSwiss IPOs from 1983 to 2000. The average market adjusted initial return is34.97%. Our results support the ex ante uncertainty hypothesis, the signallinghypothesis and, to some extent, the market cyclicality hypothesis aspossible explanations for the underpricing phenomenon on the Swiss IPOmarket. We also find evidence for lower initial returns under increasedcompetition among investment banks, and more accurate pricing whenbook-building is used. To accurately measure the long-term performance ofSwiss IPOs, we use a variety of different methods and adjust for possiblebiases. In contrast to previous findings for the U.S., we do not find a significantdrop or strong continuous underperformance of Swiss IPO stock pricesin the aftermarket. If there was any evidence for underperformance at all,Swiss IPOs show poor returns only in the very long-run after 48 months oftrading.