Growth fixation and the performance of bank initial public offerings, 1983-1991

Numerous banks and thrifts went public amid the favorable regulatory climat e and strong capital market of the mid-1980s. A sample of 393 bank initial public offerings from 1983 to 1991 lagged three benchmarks of returns over a five-year post-offering holding period. This poor performance is concentr ated among larger institutions with more aggressive loan growth. Following the PPO, many of these banks also recorded dramatic increases in loan losse s. The evidence suggests the market may have fixated on the rapid growth of these institutions or did not adequately account for changes in the post-I PO risk of their loan portfolios. (C) 1999 Elsevier Science B.V. All rights reserved.