Is there a period of listing effect or a post‐listing performance puzzle?

Abstract

Purpose

Barry and Brown find that returns are higher for securities that have been listed for shorter periods of time after controlling for firm size and a January effect. The purpose of this paper is to examine the robustness of this period of listing effect and test for a post‐listing effect.

Design/methodology/approach

By extending the sample and including additional risk measures using both the Fama and Macbeth approach and the Fama and French approach, the author is able to conduct a stronger test of the period of listing effect and jointly test for a post‐listing effect.

Findings

The results indicate that there is a period of listing effect but that the effect is driven not by the higher returns of the newly listed firms but by the lower returns of the longest listed firms. The paper also provides additional support for a post‐listing effect in the sample.

Originality/value

While the results support a period of listing effect, they invite the larger question of why longer listed firms underperform. While the Barry and Brown informational risk explanation for period of listing effect may suffice, the results indicate a greater need to understand why returns vary with firm listing age especially for the newly listed and longest listed firms.

Citation

Brown, W.O. (2013), "Is there a period of listing effect or a post‐listing performance puzzle?", Managerial Finance, Vol. 39 No. 1, pp. 4-27. https://doi.org/10.1108/03074351311283540