New Issues in Emerging Markets: Determinants, Effects, and Stock Market Performance of IPOs in Korea

Abstract

This article investigates why Korean companiesgo public and their subsequent performance. Ex ante and ex post evidence suggests firms do notgo public to fund investment in fixed assets. Financially marginal firms are more likely to go public to take advantage of windows of opportunity. Financially healthier independents also go public to rebalance their portfolios. Chaebol (conglomerate) subsidiaries apparently use initial public offerings (IPOs) to fund equity investments and take advantage of windows of opportunity. Buy- and-hold returns show Korean IPOs outperformed the stock market—with the divergence widening over time—in contrast to developed markets.

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