Is Ipo Underperformance a Peso Problem?

Ang, Andrew; Gu, Li; Hochberg, Yael V.

doi:10.1017/s0022109000004105

Cited by 31 publications

(11 citation statements)

References 56 publications

(115 reference statements)

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“…We accumulate returns starting from the first month subsequent to the month of IPO. Following Ang et al (2007), we consider longer one-, two-and three-year return intervals in order to allow time for any anomalous post-IPO performance to be more fully revealed. For firms that delist prior to the end of the annual accumulation intervals, we complete the returns accumulation with the CRSP delisting return where available.…”

Section: (Iii) Are Internet Ipo Failure Predictions Associated With Amentioning

confidence: 99%

The Relevance of Accounting Information in a Stock Market Bubble: Evidence from Internet IPOs

Bhattacharya

Demers

Joos

2010

Business Fin & Account

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Prior research shows that accounting information is relevant for stock valuation, failure prediction, performance evaluation, optimal contracting, and other decision-making contexts in relatively stable market settings. By contrast, accounting's role during stock market bubbles such as those involving a revolutionary emerging technology is the subject of considerable debate, and prominent market observers have alleged that outdated and flawed accounting practices contributed to the crash of the Internet-led high-tech bubble of the late 1990s. We address the issue of whether accounting data is informative in a stock market bubble by examining its failure prediction ability in the context of Internet IPOs, one of the most egregious and economically significant sectors of the high tech bubble. Our setting of young start-up firms is one in which there is relatively little room for managerial discretion with respect to accounting accruals; Internet firms' accounting earnings closely approximate operating cash flows. Yet in contrast to widespread criticisms of accounting and its alleged role in fueling the bubble, we find that accounting variables are highly informative for failure prediction; specifically, they are significant in explaining ex post realized Internet IPO failures. Using an existing IPO failure prediction methodology and two alternative definitions of innovative IPOs, we further show that ex ante, out-of-sample Internet IPO failure forecasts are associated with economically and statistically significant hedge returns. Our analyses suggest that the traditional financial reporting system could serve as an anchor during speculative bubbles.

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Section: (Iii) Are Internet Ipo Failure Predictions Associated With Amentioning

confidence: 99%

The Relevance of Accounting Information in a Stock Market Bubble: Evidence from Internet IPOs

Bhattacharya

Demers

Joos

2010

Business Fin & Account

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“…For example, since Ritter (1991) and Loughran and Ritter (1995) documented significant long-run underperformance of IPOs, there have been many follow-up papers that document insignificant abnormal performance of IPOs using different approaches (Gompers and Lerner, 2003;Schultz, 2003;Eckbo and Norli, 2005). 2 2 Ang, Gu, and Hochberg (2007) examine whether the documented underperformance of IPOs is due to small-sample problems and conclude that the magnitude of underperformance cannot be explained by small-sample biases. In addition, they demonstrate that the underperformance of IPO firms continues to exist over two-and three-year holding periods even in calendar-time analyses.…”

Section: Empirical Challenges Involved In Calculating Long-term Exmentioning

confidence: 99%

“…2 2 Ang, Gu, and Hochberg (2007) examine whether the documented underperformance of IPOs is due to small‐sample problems and conclude that the magnitude of underperformance cannot be explained by small‐sample biases. In addition, they demonstrate that the underperformance of IPO firms continues to exist over two‐ and three‐year holding periods even in calendar‐time analyses.…”

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confidence: 99%

Do Privatization IPOs Outperform in the Long Run?

Choi

Lee

Megginson

2010

Financial Management

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"This paper investigates the long-run stock returns of privatization initial public offering (IPO) firms using a sample of 241 privatization IPOs from 42 countries during the period 1981-2003. We compare one-, three-, and five-year holding period returns of privatization IPOs to those of the domestic stock market indices and to size and size- and book-to-market equity ratio (BM)-matched firms from the same countries. Consistent with previous studies, we find that privatization IPOs significantly outperform their domestic stock markets in the long run. However, they show less consistent abnormal long-term stock performance relative to their size or size- and BM-matched benchmark firms." Copyright (c) 2010 Financial Management Association International.

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“…In 12 out of the 13 markets they examine, average market returns are higher after a below-median equity share year than after an above-median equity share year. Schultz (2003Schultz ( , 2004 argues that it may be significant, while Ang, Gu, and Hochberg (2005), Dahlquist and de Jong (2004), and Viswanathan and Wei (2004) argue that it is minor. Some authors highlight the joint hypothesis problem, proposing that the reason why IPOs and SEOs deliver low returns is that they are actually less risky.…”

Section: Equity Issuesmentioning

confidence: 99%