Initial Public Offering Timing and Equity Puzzles in Nigeria Capital Market: Evidence from Quoted Small and Medium Scale Enterprises (IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH)

Summary

• The study investigates initial public offerings and equity puzzles for quoted SMEs in the Nigerian Capital Market over a 3-year period from 2022-2024.p.1
• The empirical regression model yields an adjusted R-squared (R2) value of 0.516450, showing that the model explains 51.6 percent of the variation in the equity price puzzle.p.1
• Fixed price initial public offerings have a statistically significant positive coefficient value of 0.080704 with a p-value of 0.0000.p.1
• Book building initial public offerings report a positive coefficient of 0.017991, which is statistically insignificant with a p-value of 0.9099.p.1
• The overall regression model achieves an F-statistic of 5.599440 and a p-value of 0.000009, indicating joint statistical significance.p.1
• In historical US baseline data from 1889 to 1978, average risk-free rates were under 1% compared to average equity returns of 7%.p.2

Key insights

1. The random effects empirical model reports an adjusted R-squared value of 0.516450, accounting for 51.6 percent of the equity price puzzle variation in quoted SMEs.p.1
2. Fixed price initial public offerings positively and significantly influence equity price puzzles with a coefficient of 0.080704.p.19
3. The Hausman test yields a chi-square statistic of 6.567080 with a probability of 0.1606, supporting the selection of the random effect model over the fixed effect model.p.19
4. Empirical results indicate that long-run co-movements cannot be established between initial public offerings and the Equity Risk Premium in Nigeria.p.1
5. Historical US stock market data over 110 years shows average stock returns of 8.06% compared to 1.14% on short-term debt, producing an equity premium of 6.92%.p.8
6. Road show price revisions produce initial return spreads of 3%, 11%, and 50% for adjustments below, within, and above the original price range.p.4