The New Game in Town: Competitive Effects of IPOs

Hsu, Scott; Reed, Adam V.; Rocholl, Jörg

doi:10.2139/ssrn.967772

Cited by 39 publications

(92 citation statements)

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“…First, we offer new insights on the underpricing puzzle (e.g., Ritter and Welch, 2002): The higher underpricing of isolated IPOs is consistent with a myopia of actors taking part to the going public process (e.g., underwriters), who do not seem to properly take into account the LHB effect in the IPO price-setting process. Second, our findings on the asset-pricing implications of local IPOs and delistings are new to the literature and join the recent contributions by Braun andLarrain (2009), Colaco et al (2009) and Hsu et al (2010) whereby IPOs are investigated as an integrated phenomenon that interacts with the surrounding economic environment rather than as a stand-alone corporate event. Our results for delistings introduce this same integrated perspective into the ongoing public-to-private transactions debate (e.g., Renneboog and Simons, 2005;Renneboog et al, 2007;Baran and King, 2010;Achleitner et al, 2013;Boubakri et al, 2013;Fidrmuc et al, 2013;Croci and Del Giudice, 2014).…”

Section: Introductionsupporting

confidence: 75%

Local IPOs, local delistings, and the firm location premium

Baschieri

Carosi

Mengoli

2015

Journal of Banking & Finance

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a b s t r a c tBorrowing a measure from ecology, we introduce a spatial dispersion index to quantify the firm traits related to firm geographic location and investigate firm exposure to local home bias and local investor risk tolerance as determinants of corporate market value. Consistent with the investor preference for local stocks, we find listed firms benefit from a location premium that increases with firm isolation and local investor wealth. IPOs and delistings are found to affect the market value of neighboring listed firms: isolated firms decrease in value when they cluster due to local IPOs while clustered firms increase in value as they become more isolated due to local delistings. Local firm clustering and risk tolerance also affect IPO underpricing. Empirical findings depict a framework where IPOs and delistings are locally jointly determined.

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Section: Introductionsupporting

confidence: 75%

Local IPOs, local delistings, and the firm location premium

Baschieri

Carosi

Mengoli

2015

Journal of Banking & Finance

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“…These effects are likely to be dependent on the composition of the market. Empirically, there is indeed an effect of new listings on the relative prices of the firms already in the market (Shleifer, 1986;Braun and Larrain, 2009;Hsu et al, 2010). This paper provides a joint evolution of the industrial composition of the stock market that is consistent with rational listing choices, and that generates effects on the prices of other firms.…”

Section: Introductionmentioning

confidence: 58%

The going public decision and the structure of equity markets

Astudillo¹,

Braun

Castaneda

2011

Journal of International Money and Finance

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The industries in which listed firms are concentrated in less developed equity markets are not random, nor entirely explained by the underlying composition of production. Listed firms and market capitalization are disproportionately concentrated in industries with low beta (measured with their beta with the market portfolio in the U.S.). We document a strong positive relationship between the industry-weighted country beta and the degree of market development across countries. Recent IPO activity confirms the result since new listings have higher betas than the average firm already in the market.

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“…Braun & Larrain (2009) show that the intra-industry effect is stronger when the IPO is issued in markets that are less integrated internationally, when the IPO is bigger, and when the stock return of the other assets is highly correlated with that of the firm undertaking the IPO. Hsu et al (2010) revisit the topic using a sample of 4,188 completed and 1,630 withdrawn U.S. IPOs occurring between 1980 and 2001. Their main conclusion is that rival companies experience negative stock price reactions to completed IPOs in their industry, and positive stock price reactions to their withdrawal.…”

Section: Research Backgroundmentioning

confidence: 99%

“…In fact, the parallel studies investigating somewhat related issues focus on the impact of Initial Public Offerings (IPOs) on their listed competitors (e.g. Akhigbe, Borde & Whyte, 2003, Braun & Larrain, 2009Hsu, Reed & Rocholl, 2010;Cotei & Farhat, 2013). Yet, SMEs are very different from publicly listed companies, which justifies revisiting the topic using SME-based samples, a hardly negligible issue since these companies are the backbone of the EU's economy, generating 28% of its GDP and providing jobs for 88.8 million people in 2013 (European Commission, 2014).…”

Section: Introductionmentioning

confidence: 99%

New restaurants and their intra-industry effects: Evidence from Portugal

Coelho¹

2017

TMs

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This paper investigates the intra-industry effects resulting from the birth of a new restaurant at Portugal. Using event-study methods, this paper finds that, in the year the new competitors open for business, industry rivals experience an average abnormal loss of -17.6% in their return-on-assets, which is due to a significant decrease in their profit margin, and asset turnover ratio. Regression analysis further shows that high industry concentration, low labor productivity, and low asset profitability magnify the rivals' underperformance, which is particularly acute when the restaurants are located at Lisbon and Oporto, the two most heavily populated Portuguese cities. Overall, this paper contributes to the literature studying the economics of the eating-places industry, and has important implications for both practice, and public policy. Keywords:Restaurants, intra-industry effects, abnormal operating performance, event-study. ResumoEste artigo investiga os efeitos intra-indústria que resultam da abertura de um novo restaurante em Portugal. Recorrendo ao método do estudo de evento, mostra-se que os restaurantes rivais sofrem uma redução anormal da sua rendibilidade do activo na ordem dos -17.6% no ano em que os competidores iniciam a sua actividade, a qual parece resultar de uma queda anormal da sua margem de lucro e rotação do activo. A utilização da análise de regressão permite ainda verificar que uma elevada concentração da indústria, a localização numa grande cidade como Lisboa ou Porto e a existência de baixos níveis de produtividade do factor trabalho são factores que magnificam os resultados anteriormente mencionados. O presente artigo contribui assim para melhor se compreender a dinâmica empresarial ligada ao sector da restauração, tendo importantes implicações para a prática e para a definição de políticas públicas. Palavras-chave:Restauração, efeito intra-indústria, performance anormal, estudo de evento.

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The New Game in Town: Competitive Effects of IPOs

Cited by 39 publications

References 0 publications

Local IPOs, local delistings, and the firm location premium

Local IPOs, local delistings, and the firm location premium

The going public decision and the structure of equity markets

New restaurants and their intra-industry effects: Evidence from Portugal

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