The performance of entrepreneurial companies post-listing on the New Zealand Stock Exchange

Abstract

The paper reports an investigation of the returns obtained on a listed portfolio of entrepreneurial companies comparing these with a portfolio of listed small businesses and the stock market overall. The initial findings produce counter-intuitive results in that the returns on the portfolio of entrepreneurial companies appear to be less than those for other small companies and for the market overall. Further, initial public offerings of entrepreneurial companies appear to be overpriced and suffer a price decline post-listing that takes approximately a year and a half to recover. An implication of such results is that money will not flow to the entrepreneurial firms, which may have unfavourable longer-term consequences for economic growth. Various government polices are directed towards achieving sustainable economic growth through the smaller business sector and encouraging these businesses to expand and list on the stock exchange. The overpricing of IPOs and lower returns are not likely to encourage investor support for the entrepreneurial companies, making it difficult for these policies to succeed.