Export Activity, IPO Underpricing, Long-Run Performance and Survival

41 Pages Posted: 11 Aug 2012 Last revised: 17 Sep 2018

See all articles by David C. Mauer

David C. Mauer

University of North Carolina (UNC) at Charlotte

Song Wang

University of Central Florida - Department of Finance

Xiao Wang

University of Science and Technology of China

Yilei Zhang

University of North Carolina (UNC) at Charlotte

Date Written: January 6, 2013

Abstract

We examine the effect of export activity on the pricing of initial public offerings (IPOs) and their post-IPO performance and survival. On the one hand, foreign market operations diversify a firm’s revenue base and the risk of domestic cash flow shocks and may also provide an entree into foreign sources of financing. On the other hand, export activity may bring additional risk and complexity leading to greater uncertainty about the pricing of the IPO. Indeed, relative to non-exporting IPO firms, exporting IPO firms are significantly smaller, are riskier according to standard measures, and have higher expenditures on research and development. Using a sample of 4,837 IPO firms from 1986 to 2010, we find that IPO firms with export activity have a significantly lower level of underpricing than IPO firms without export activity after controlling for all factors known to influence IPO initial returns. In addition, the risk-adjust returns of exporting IPO firms outperform non-exporting IPO firms by 55 - 122 basis points on a monthly basis over either three or five year periods after the IPO. Our initial return and long-run return results are highly robust to propensity score matching techniques which account for possible reversed causality and selection bias. Lastly, we find that exporting IPO firms have significantly higher survival rates than non-exporting IPO firms; the hazard rate of firms that export around IPO years is 54 - 71% of firms that do not export. Overall, we provide strong evidence that export activity has an economically significant effect on the valuation and subsequent performance of IPO firms.

Keywords: initial public offering, exports activity, IPO underpricing, IPO long-run performance, survival analysis

JEL Classification: G32, F23

Suggested Citation

Mauer, David C. and Wang, Song and Wang, Xiao and Zhang, Yilei, Export Activity, IPO Underpricing, Long-Run Performance and Survival (January 6, 2013). Midwest Finance Association 2013 Annual Meeting Paper, Available at SSRN: https://ssrn.com/abstract=2127276 or http://dx.doi.org/10.2139/ssrn.2127276

David C. Mauer

University of North Carolina (UNC) at Charlotte ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States
704-687-7707 (Phone)

Song Wang

University of Central Florida - Department of Finance ( email )

Orlando, FL 32816-1400
United States

Xiao Wang

University of Science and Technology of China ( email )

China

HOME PAGE: http://https://sites.google.com/site/xiaowangeconomics/

Yilei Zhang (Contact Author)

University of North Carolina (UNC) at Charlotte ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States

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