The New Issues Puzzle

Loughran, Tim; Ritter, Jay R.

doi:10.2307/2329238

Cited by 1,449 publications

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“…Ritter (1991) examines a sample of IPOs, Speiss and Affleck-Graves (1995) examine SEOs, and Loughran and Ritter (1995) examine both.…”

Section: D1 Equity Issuesmentioning

confidence: 99%

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Behavioral Corporate Finance: A Survey

Baker

Ruback²,

Wurgler

2004

SSRN Journal

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Research in behavioral corporate finance takes two distinct approaches. The first emphasizes that investors are less than fully rational. It views managerial financing and investment decisions as rational responses to securities market mispricing. The second approach emphasizes that managers are less than fully rational. It studies the effect of nonstandard preferences and judgmental biases on managerial decisions. This survey reviews the theory, empirical challenges, and current evidence pertaining to each approach. Overall, the behavioral approaches help to explain a number of important financing and investment patterns. The survey closes with a list of open questions.

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“…Ritter (1991) examines a sample of IPOs, Speiss and Affleck-Graves (1995) examine SEOs, and Loughran and Ritter (1995) examine both.…”

Section: D1 Equity Issuesmentioning

confidence: 99%

“…Five years out, the average IPO earns lower returns than a size-matched control firm by 30%, and the average SEO underperforms that benchmark by 31%. Gompers and Lerner (2003) fill in the gap between the samples of Stigler (1964) and Loughran and Ritter (1995). Their sample of 3,661…”

Section: D1 Equity Issuesmentioning

confidence: 99%

Behavioral Corporate Finance: A Survey

Baker

Ruback²,

Wurgler

2004

SSRN Journal

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“…The constant decline in P/E and M/B suggest that firms took advantage of over-optimism of investors. The decline in earnings in post IPO period is in support of Ritter (1991), Jain and Kini (1994) and Loughran and Ritter (1995).…”

Section: Resultsmentioning

confidence: 84%

An empirical investigation of market timing behavior: evidence from Indian IPOs

Mayur¹

2016

Investment Management and Financial Innovations

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The purpose of this paper is to investigate the market timing behavior of issuers of Indian Initial Public Offerings (IPOs). It was found that investor's expectation that earnings growth will continue after IPO were not even sustained in post IPO period. The constant decline in P/E and M/B suggested that firms took advantage of over-optimism of investors. The deterioration in post IPO performance show that issuer took benefit of pre IPO profit margin knowing that the level would not be continued in the future. Considering that the issuers took advantage of favorable market condition, a multivariate analysis was carried out to examine whether issuers tried to maximize their proceeds through IPO or not. The idea is that any market timing aspect should get reflected in the effort to maximize proceeds in the favorable market condition. The result based on multivariate regression suggest that market timers, identified as firms that go public when the market is hot, tried to maximize the total proceeds at the time of IPO. The hot issue market effect was remarkably robust; it was significant for both firm and industry-level characteristics.

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“…Table 11 (Panel J) shows the results of questions about the market timing theory discussed by Lucas and McDonald (1990), Choe, Masulis, and Nanda (1993), Loughran and Ritter (1995), and Ritter and Welch (2002), who argue that firms prefer to go public when the market is heated because it can increase their value. The two pertinent questions asked whether it was beneficial to the company that the market was hot at the time of the IPO and whether companies with a high market-to-book ratio are more likely to open their capital.…”

Section: Results Of the Theory Of Market Timingmentioning

confidence: 99%

“…Choe, Masulis, and Nanda (1993) conclude that companies avoid going public when there is lack of other good companies that are issuing new shares. Loughran and Ritter (1995) conclude that IPOs occur during certain windows of opportunity, that is, during a heated market in which the company can have better opportunities for strong returns. Ritter and Welch (2002) suggest that, barring information asymmetry, if the company realizes that the valuation of its business is based more on internal perspectives, the basic involvement of the entrepreneur in the day-to-day business is paramount in setting the valuation while the actions of the public are less so.…”

Section: Market Timing Theorymentioning

confidence: 94%

Abertura de capital no Brasil: percepções de executivos financeiros

Steffen

Zanini

2012

Rev. contab. finanç.

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This study examines financial executives' perceptions of Initial Public Offerings (IPOs) in Brazil, replicating in large part the research of Brau, Ryan, and DeGraw (2006) in the United States. We surveyed 32 chief financial executives of companies that conducted an IPO between 2004 and 2008 in Brazil and tested two financial theories: the Life Cycle Theory and the Market Timing Theory. The results show that the financial executives in Brazil confirm the life cycle theory as well as market timing and static trade-off theories. The financial executives do not consider an IPO to be a way to change company control, and they do not perceive the disadvantages of the loss of control and confidentiality that result from an IPO.

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The New Issues Puzzle

Cited by 1,449 publications

References 0 publications

Behavioral Corporate Finance: A Survey

Behavioral Corporate Finance: A Survey

An empirical investigation of market timing behavior: evidence from Indian IPOs

Abertura de capital no Brasil: percepções de executivos financeiros

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