Authors: Mohammad S. Al-Shiab
This paper examine a comprehensive set of 162 MENA initial public offering of companies launched between June 2001 and June 2012 excluding those 89 for the financial institutions industry and 114 not available set of required data for analyzing post-listing returns. Constructing the portfolios return on the equally-weighted bases, the study tests the asymmetry hypothesis by investigating the long-run returns in IPOs located in the Middle East and North African Countries. By employing the Paired-Samples t-statistics and Heteroskedasticity Robust Standard Errors (HAC) tests, results show that overall Egypt and Saudi Arabia have IPOs significantly underperformed where all other countries show the same conclusion but without being significant. More interestingly, all values have a decreasing trend confirming the fact that over the years IPOs portfolio underperformance reduced. Such gradual improvement in the IPOs portfolios underperformance might be as consequence of releasing and disclosing more information over longer periods to comfort investors behavior toward the IPOs especially in an environment experience lack of transparency, adoption of international corporate governance standards, adoption of international financial reporting standards, and lack of stock exchanges. Overall findings consistent with the asymmetry hypothesis since reducing information asymmetry reduces risk premiums and price discounts, hence, improving disclosure speeds up price discovery and improve market efficiency.
Keywords: IPO, Asymmetry Hypothesis, Emerging Stock Markets