Efficiency Dynamics of Initial Public Offerings Using Data Envelopment Analysis and Malmquist Productivity Index Approach

Abstract

This study is aimed to examine the efficiency and productivity growth of Initial Public Offerings (IPOs) firms listed on Karachi Stock Exchange (KSE), Pakistan from 2000 to 2012 by using three stages - Data Envelopment Analysis (DEA) and Malmquist Productivity Index (MPI).  The analysis and comparison of the efficiency and productivity growth of IPOs on sectoral basis in the pre and post period of IPOs is also investigated. This is ever first study to measure the pre IPO efficiency across the globe in the field of IPOs. The overall efficiency scores of IPO firms dismal as the percentage of optimum level of IPO firms remain between 5% and 20% in all the three stages in pre and post IPOs. In the analysis of broader categories of sectors; private, state-owned enterprises (SOEs), manufacturing, financial, other services sectors, the results of DEA model of three stages suggest that neither of the sector is constant return to scale (CRS) efficient nor and Variable Returns to Scale (VRS) in pre and Post IPO. Even the efficiency scores are decreased in post IPO after one year. However, in detail sector-wise analysis the only oil and gas sector showed optimal level under VRS in stage 2. Further, SOEs showed some better efficiency than private IPO firms. The overall results of declining trend in total productivity growth of IPOs after three years period in KSE are observed. The overall results suggest that, after acquiring further resources, IPO firms did not improve their efficiency level and productivity growth after the period of three years of IPOs.

DOI: http://dx.doi.org/10.5755/j01.ee.27.2.10062