Competitive Valuation Effects of Australian IPOs

32 Pages Posted: 17 Aug 2012

See all articles by Andrew McGilvery

Andrew McGilvery

affiliation not provided to SSRN

Robert W. Faff

University of Queensland

Shams Pathan

Curtin University; Financial Research Network (FIRN)

Date Written: October 1, 2011

Abstract

This study examines the valuation effects that Australian initial public offerings (IPOs) have on industry competitors and to what extent this can be explained by the IPO firm’s corporate governance profile and the intended use of their offer proceeds. Using a sample of 106 IPOs between 1999 and 2009, the results indicate that companies experience negative stock price reactions to the completion of an IPO in their industry on days leading up to and including the event date. The multivariate results show that in relation to corporate governance factors, both board size and CEO share ownership exhibit negative relationships with rival firm abnormal returns. Moreover, IPOs which disclose either investment, or both debt reduction and investment as the intended use of proceeds result in a greater negative price impact upon rival firms.

Keywords: Initial public offerings, Corporate Governance, Board size, CEO ownership, Abnormal return, Information transfer

JEL Classification: G11, G14, G34

Suggested Citation

McGilvery, Andrew and Faff, Robert W. and Pathan, Shams, Competitive Valuation Effects of Australian IPOs (October 1, 2011). International Review of Financial Analysis, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2131212

Andrew McGilvery

affiliation not provided to SSRN ( email )

Robert W. Faff (Contact Author)

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Shams Pathan

Curtin University ( email )

Kent Street
Bentley
Perth, WA WA 6102
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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