The investment and operating performance of Japanese initial public offerings

This paper studies long-run stock returns and the operating performance of 180 initial public offerings (IPOs) listed on the Tokyo Stock Exchange during the 1971-92 period. The aftermarket downward drift is not only confirmed but also found to be large in magnitude relative to a number of benchmarks. In contrast to evidence from the US, the post-issue deterioration in operating performance cannot be attributed to the reduced managerial ownership. This provides strong support for the 'windows of opportunity' explanation for the new issue puzzle by Loughran and Ritter (1995, 1996). © 1997 Elsevier Science B.V.