Post-IPO Stock Valuation and Firm Age: Evidence from Korea

Abstract

Using Korean stock market data, we find that firm age is a key determinant of firm value. Specifically, firm value measured by the market-to-book equity ratio has a downward sloping relation with firm age. We also find that profitability and capital expenditures decline as firms age, suggesting that firms may become less valuable with age as they become less profitable and run out of investment opportunities. Our evidence also suggests that firms conduct IPOs by taking advantage of a small window of opportunity for listing during which their profitability is temporarily at its peak.

Keywords: firm age; market-to-book; firm maturity; IPO window; learning hypothesis

JEL Classification: G10, G30