Initial Public Offerings and Long-Term Returns: A Sector-Based Evaluation

K.S.V.G.K Murthy; G. Prasanna Kumar

doi:10.55524/ijirem.2025.12.1.12

Abstract

The initial public offering (IPO) is a critical milestone in a company’s transition from private to public ownership, offering increased capital access and liquidity. However, the long-term performance of IPOs remains debated, with many firms underperforming market benchmarks over extended periods. While initial IPO returns often reflect investor enthusiasm which highlights consistent underperformance over three to five years, attributed to over-optimism, information asymmetry, and risks inherent in young firms. Sector-specific dynamics also play a role, with technology and biotech sectors experiencing higher volatility, while more established industries like financial services and utilities show stable, yet slower growth. Timing and market conditions further influence IPO outcomes, with firms launched in "hot markets" facing long-term corrections. Firm-specific factors, such as governance and insider ownership, also impact performance. This study examines the long-term IPO performance across various sectors, focusing on key industries and identifying factors driving success or failure, offering insights for investors and policymakers navigating IPO challenges and opportunities.

Keywords

Initial Public Offerings (IPOs); long-term performance; sector-specific dynamics; market conditions; corporate governance.

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Cites this article as

K. Murthy, G. P. Kumar, "Initial Public Offerings and Long-Term Returns: A Sector-Based Evaluation", International Journal of Innovative Research in Engineering & Management (IJIREM), Vol-12, Issue-1, Page No-75-81, 2025. Available from: https://doi.org/10.55524/ijirem.2025.12.1.12