Adam Szyszka

From the Efficient Market Hypothesis to Behavioral Finance: How Investors' Psychology Changes the Vision of Financial Markets

This paper confronts the main foundations of the neoclassical theory of the capital market and asset pricing with allegations of behavioral finance. Cornerstones of the traditional theory are discussed in the first section. It is followed by a brief presentation of the behavioral approach. Further, the paper discusses consequences of the new view of finance to capital market practitioners - investors, corporate finance, and policy-makers. The paper concludes with final remarks and some thoughts on the future development of the capital market theory.

Factors Influencing IPO Decisions. Do Corporate Managers Use Market and Corporate Timing? A Survey

Abstract This paper explores the motives for Initial Public Offerings (IPOs); that is, whether market mispricing or the behavioral inclinations of investors and analysts impact corporate decisions about rising equity, with a particular focus on market and corporate timing practices of managers going public. To do so, an anonymous survey was conducted of 166 managers of firms that recently went public at the Warsaw Stock Exchange in Poland (being the second most active IPO market in Europe, after London). The resulting data reveals that managers attempt to time bullish markets and good historical corporate financial results.

Is the Abnormal Post-IPO Underperformance Really Abnormal? The Evidence from CEE Emerging Markets

No, it is not. Using sorting, cross-sectional tests, regression, and tests of a monotonic relation, we investigate the long-run post-IPO performance and its sources in the Central and Eastern European (CEE) markets. We examine over 1100 stocks from 11 CEE countries for the period 2002-2014. Controlling for value, size, momentum, and the influence of microcaps, we test the performance of portfolios of age-sorted stocks. We document that “old stocks” perform significantly better than “young stocks”, but only if a market beta is the sole risk factor considered. After accounting for the size and value effects, the IPO firms do not perform either better, or worse than non-issuing companies. The sources of initial low B/M ratios of debuting companies may lie in a time-varying financial quality. The market newcomers are in much better financial shape than their older counterparts. However, over 2-5 years the fundamentals deteriorate and the financial quality regresses to the mean.

Post-merger returns in frontier markets, or how we learned to stop worrying and love the acquirers

This study presents the results from a comprehensive out-of-sample test of long-run returns following mergers and acquisitions (M&As). Using a unique sample from 23 frontier markets of almost 800 transactions conducted during the years 1992 to 2016, we implement both cross-sectional tests and time-series examinations based on a calendar-time portfolio approach. Contrary to evidence from developed markets, the M&As in these frontier markets do not lead to abnormal underperformance of acquirers, regardless of whether they paid for the acquisition with cash or stock. The results are robust to many considerations, including subsample and subperiod analysis, alternative formation periods, different portfolio construction approaches.

Post-IPO Underperformance and the Cross-Section of Stock Returns at the Warsaw Stock Exchange

In this paper we propose a new cross-sectional asset pricing model employing a Young-minus-Old (OMY) factor, which accounts for long-run post-IPO underperformance. The OMY factor might be also seen as a measure of market sentiment. We test the model using stock returns from the Warsaw Stock Exchange, second most active IPO market in Europe after London, in the period from April 2001 to January 2014. We form portfolios double-sorted on size and age and attempt to explain their returns with the new model and also the traditional, well-established models such as CAPM and the Fama-French three-factor model. The CAPM and F-F models are rejected, while our model explains the returns well. Additionally, wedeliver fresh out-of-sample evidence for the long-term underperformance of initial public offerings in Poland. The anomaly is particularly strong among the small companies.

Do Investor Preferences Drive Corporate Dividend Policy

This paper investigates whether managers adapt their dividend policies to the changing preferences of investors, as predicted by the catering theory of dividends. First, we noted a systematic decline in companies that paid out dividends in a sample of 2226 American publicly-traded companies, not including companies of low capitalization and low profitability. Next, we observed a parallel declining tendency in dividend premiums in the studied sample. The decrease in the tendency to pay out dividends among companies on the American market can be linked to the fact that investors have assigned less weight to dividends over the years, and so in turn they were less willing to reward dividend-paying companies with higher valuations. Periodic fluctuations in investor mood with regard to dividend-paying companies, and the resulting changes in their relative valuation, influence the tendency of managers to pay out dividends. We showed a statistically significant relationship between changes in dividend premiums in one year, and the proportion of companies that paid out dividends in the following year. Additionally, it looks like companies try to compensate shareholders by paying out dividends in years of worse performing market and are less likely to distribute their earnings when shareholders gain on rising stock price. We found a negative correlation between the change in proportion of companies paying out dividends and changes in the S&P500 index. However, this does not seem to reflect investor preferences and taste for dividends. We found no statistically significant correlations between the change of the dividend premium and changes in the S&P500 index and, surprisingly, we observed relatively worse valuation of dividend-paying firms in years of market downturn.