The IPO Derby: Are There Consistent Losers and Winners on this Track?

33 Pages Posted: 11 May 2003

See all articles by Konan Chan

Konan Chan

National Chengchi Unversity (NCCU) - Finance

John Cooney

Texas Tech University - Rawls College of Business

Joonghyuk Kim

Case Western Reserve University - Department of Banking & Finance

Ajai K. Singh

Department of Finance, University of Central Florida

Date Written: May 20, 2003

Abstract

Recent studies have documented that various factors such as discretionary accounting accruals, underwriter reputation, venture capital backing, and firm size will affect the long-run performance of IPOs. However, it is not clear whether the return predictability of these attributes are the manifestation of one phenomenon, or independent results. In this study, we use univariate and multivariate analyses on these factors to trace the sources of return predictability. We find that these previously identified effects are not the same phenomenon, though correlated to some extent. The results show that a confluence of these determinants is more important than any individual factor in explaining the IPO long-run performance. We also identify a subset of IPOs that outperform their benchmark and another subset that consistently underperforms.

Keywords: Initial public offerings, Investment banks, Earnings management, Underwriter reputation, and Venture-capital

JEL Classification: G24, G32

Suggested Citation

Chan, Konan and Cooney, John W. and Kim, Joonghyuk and Singh, Ajai K., The IPO Derby: Are There Consistent Losers and Winners on this Track? (May 20, 2003). Available at SSRN: https://ssrn.com/abstract=392002 or http://dx.doi.org/10.2139/ssrn.392002

Konan Chan (Contact Author)

National Chengchi Unversity (NCCU) - Finance ( email )

No. 64, Chih-Nan Road
Section 2
Taipei, 11623
Taiwan
+886-2-29393091 ext 81239 (Phone)

John W. Cooney

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States
806-834-1536 (Phone)

Joonghyuk Kim

Case Western Reserve University - Department of Banking & Finance ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States
216-368-2142 (Phone)
216-368-4776 (Fax)

Ajai K. Singh

Department of Finance, University of Central Florida ( email )

College of Business Administration
12744 Pegasus Drive
Orlando, FL 32816
United States
407-823-0761 (Phone)
407-823-6676 (Fax)

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