Going Public: An Empirical Investigation of U.S. Bound Israeli IPOs
Version of Record online: 2 JUL 2010
© 2010 New York University Salomon Center and Wiley Periodicals, Inc.
Financial Markets, Institutions & Instruments
Volume 19, Issue 3, pages 215–244, August 2010
How to Cite
Hasan, I. and Waisman, M. (2010), Going Public: An Empirical Investigation of U.S. Bound Israeli IPOs. Financial Markets, Institutions & Instruments, 19: 215–244. doi: 10.1111/j.1468-0416.2010.00158.x
- Issue online: 2 JUL 2010
- Version of Record online: 2 JUL 2010
Between 1985–2003, more than 120 Israeli companies went public in the U.S., bringing the accumulated number of U.S. bound, Israeli initial public offerings (IPOs) to a figure greater than all other foreign countries combined. In this study, we compare the short and long run performance of Israeli IPOs to that of similar international and U.S. IPOs. Holding all else equal, we find that Israeli IPOs are significantly less underpriced than their local and foreign counterparts. As we examine the characteristics of Israeli issuers, we find that they differ than those of other foreign and local issuers in some important dimensions that compensate investors for information asymmetry and risk. First, compared to their home market capitalization size, U.S. bound Israeli IPOs, are significantly larger than the IPOs conducted by their foreign counterparts. Second, Israeli issuers tend to perform better than other foreign and U.S. local IPOs during our entire period of observation. Third, to a large extent, the Israeli firms in our sample have products, licensing or franchising relationships or venture capital funds with strong roots in the U.S. prior to the IPO. And fourth, the relevant investor community of Israeli IPOs, at least at the early stages, is small and overwhelmingly American. Our findings are consistent with prior studies documenting that firms raising capital outside of their domicile country are typically a select group of high quality firms in need of external financing that cannot be sufficiently provided in their home market.