Article Abstract:
We investigate the long-run underperformance of recent initial public offering (IPO) firms in a sample of 934 venture-backed IPOs from 1972-1992 and 3,407 nonventure-backed IPOs from 1975-1992. We find that venture-backed IPOs outperform nonventure-backed IPOs using equal weighted returns. Value weighting significantly reduces performance differences and substantially reduces underperformance for nonventure-backed IPOs. In tests using several comparable benchmarks and the Fama-French (1993) three factor asset pricing model, venture-backed companies do not significantly underperform, while the smallest nonventure-backed firms do. Underperformance, however, is not an IPO effect. Similar size and book-to-market firms that have not issued equity perform as poorly as IPOs. (Reprinted by permission of the publisher.)
User Contributions:
Comment about this article or add new information about this topic:
Article Abstract:
An inference model is presented that addresses concerns over abnormal returns in long-horizon event studies, specifically issues of normal distribution and independence. Usage on an examination of initial public offerings demonstrates the inference model's efficiency, and shows that the three-factor model is inconsistent with observed data.
User Contributions:
Comment about this article or add new information about this topic:
Article Abstract:
Research shows that analystsE target prices information produces a significant market reaction, both unconditionally and conditional based on earnings forecast revisions and recommendations on contemporaneously issued stock. Target prices projected one year ahead tend to be 28% higher than current market prices.
User Contributions:
Comment about this article or add new information about this topic: