Long Term under Performance IPO and Financial Distress (Empirical Study of Indonesia Stock Exchange)

Long term under performance behavior is an anomaly of initial public offering (IPO). Various theories explain the anomalous behavior through several approaches of Information Asymmetry, Winner Curse, Traditional – Ibbotson, and Signaling Equilibrium Phenomenom and Withdrawn IPO (WIPO). There is empirical evidence, through this research, that the long term under performance of IPO in the Indonesian stock market is influenced by fundamental factors (Enterprise Value) and financial distress factors (Z-Score). Meanwhile, the market factor represented by volatility and PER does not affect long term under performance of IPO. In the perspective of capital structures and agency models, company owners who know the company’s future prospects are deteriorating would prefer to finance through the issuance of shares instead of adding debt. In this context, company owners apply risk-sharing with other investors. IPO can also be classified as an effort to sell assets, as the most common way used by companies to avoid bankruptcy.

Keywords: IPO Anomaly, Long term under performance, Financial Disterss
JEL Classification: E2, G3, J2