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The IPO Derby: Are There Consistent Losers and Winners on This Track?
Author(s) -
Chan Konan,
Cooney John W.,
Kim Joonghyuk,
Singh Ajai K.
Publication year - 2008
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2008.00002.x
Subject(s) - initial public offering , underwriting , accrual , reputation , business , accounting , stock (firearms) , venture capital , econometrics , monetary economics , economics , finance , earnings , engineering , mechanical engineering , social science , sociology
We examine the individual and joint relation of discretionary accounting accruals, underwriter reputation, and venture capital backing with the long‐run performance of initial public offerings (IPOs). We find that although correlated to some extent, these variables do not manifest the same underlying phenomena in their relation to IPOs' performance. The confluence of the variables is more important than using any one of them individually to identify IPOs that exhibit abnormal long‐run stock returns. The combination of their negative aspects helps identify extreme underperformers. We also identify a set of winner IPOs by combining the positive aspects of the three variables.