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Finance and Credit
 

Initial and mid-term returns of Russian IPOs

Vol. 16, Iss. 45, DECEMBER 2010

Available online: 3 December 2010

Subject Heading: Securities market

JEL Classification: 

Napolnov A.V. graduate student of chair «Securities and Financial Engineering», Finance academy under the government of the Russian Federation
andrey.napolnov@gmail.com

Russian IPO market, one of the world’s largest primary markets in 2007 and the hardest hit in 2008-2009, gradually revives after the downfall while the companies that postponed share offerings restart preparations for private-to-public transformation. Apparently researches on equity capital markets are the issues of the day again. Current paper systematizes theoretical views on the reasons for IPO underpricing, accompanied with the analysis of long-term and short-term returns, including initial returns of Russian IPOs in 1996 - 9M 2010, fundamental reasons for the difference in returns for investors buying shares at IPO in Russia and the rest of the world. The conclusion is that low initial returns of Russian IPOs is determined by the conflict of interest between investment bank and issuer, in particular more strong negotiation position of current shareholders and readiness of investment bankers to agree terms proposed by issuer’s representatives to strengthen competitive position on the highly perspective Russian primary market

Keywords: Equity capital markets, IPO, initial returns, underpricing

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ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

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