Initial Public Offering Performance on the Lusaka Securities Exchange: Assessing Long Term Outcomes and Market Efficiency

Abstract

This study examined the performance of Initial Public Offerings (IPOs) on the Lusaka Securities Exchange (LuSE) to better understand the dynamics of IPO pricing and performance in an emerging market. The research focused on the following key variables; Firm Size, Issue Size, Subscription Level, and Age of the Firm. The aim was to identify the factors that drive short-term under-pricing and long-term underperformance of IPOs on LuSE. Cumulative Abnormal Returns (CAR) and Buyand-Hold Abnormal Returns (BHAR) was used to analyse IPO performance over different time periods. The study revealed significant under-pricing in the short term and underperformance in the long term. The results were consistent with trends observed in other emerging markets. The findings indicated that market inefficiencies, information asymmetry, and investor behaviour played important roles in modelling IPO outcomes on LuSE. Despite the significance of firm-specific variables, the low explanatory power of the regression models (as evidenced by low R-squared values) suggested that factors like investor sentiment and speculative behaviour had a substantial effect on IPO long term performance but were difficult to capture using conventional methods. This research highlighted the need for regulatory reforms to improve market transparency, enforce better disclosure standards, and enhance investor education to mitigate speculative behaviour. Additionally, increasing institutional investor participation and strengthening corporate governance could significantly improve the efficiency and stability of the IPO market on LuSE. The study concluded with practical recommendations, aimed at perfecting the IPO process and reducing inefficiencies in the market. Future research was recommended to explore the effects of macroeconomic factors, behavioural finance elements, and the role of institutional investors in the IPO markets of emerging economies.