New Lists: Fundamentals and Survival Rates
Eugene F. Fama
University of Chicago - Finance
Kenneth R. French
Tuck School of Business at Dartmouth; National Bureau of Economic Research (NBER)
CRSP Working Paper No. 530; Tuck Business School Working Paper No. 03-15
The class of firms that obtain public equity financing expands dramatically in the 1980s and 1990s. After 1979, the rate at which new firms are listed on major U.S. stock exchanges jumps from about 160 to near 550 per year, and the characteristics of new lists change. The cross-section of new list profitability becomes progressively more left skewed, and growth becomes more right skewed. The result is a sharp decline in new list survival rates. We suggest that the changes in the characteristics of new lists are due to a decline in the cost of equity capital that allows weaker firms and firms with more distant expected payoffs to become viable candidates for public equity financing.
Note: Previously titled "New Lists and Seasoned Firms: Fundamentals and Survival Rates"
Number of Pages in PDF File: 57
Date posted: May 7, 2003