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.
The main goal of this study is to analyze a sample of self-underwritten Initial Public Offerings (IPOs) where the going public process is conducted without the participation of any investment bank or underwriter at all. We test the hypothesis that the major incentive to self-underwrite is to maximize the proceeds from the IPO.The firms in this study are considered self-underwritten if and only if they explicitly describe their own IPO as such in the registration statement and the prospectus. This definition is completely new, since most previous academic papers have considered as those where the issuer is an investment bank that also participates in its own IPO. The main conclusion of this study is that there are no significant differences on the level of underpri...
... IPOs experience a mean initial return of 10.8 percent, which is more, though not statist...The benchmark adjusted buy and hold abnormal return is thus calculated as:. BHAR^sub j,T^ = Π ...
...) shows size-adjusted buy and hold abnormal returns for. a sample of 1,528 firms that performe...
... can increase the risk premium and stock return volatility of the restating firms (See Aboody (200...) (2002), and Wu (2002) document negative abnormal stock returns of the restating firms in the months...
The liquidity hypothesis predicts negative abnormal returns around the conversion-forcing call announcements of convertible bonds, followed by a price recovery. We find the former but not the latter. The liquidity hypothesis also implies that the abnormal returns during the announcement and the post-announcement periods should be related to proxies for the stock's liquidity. Again, our findings do not support these implications of the liquidity hypothesis. We conclude that the reason for the negative abnormal returns around the announcement of a conversion-forcing call needs further examination.
Evidence exists of abnormal stock returns at and following stock split announcements. The successful prediction of splits may therefore enhance investor returns, yet few studies attempt such forecasts. We note a neglected aspect of prior prediction studies-that companies enjoying a favorable stock market response to a previous split are more likely to split again. Firms in industries with a record of favorable post-split performance may also be more likely to split. We find that inclusion of these factors enhances split prediction accuracy. We also find that with these factors our split prediction model generates significant abnormal returns.
We examine the long-run return performance of over 1,600 firms with reverse stock splits. These stocks record statistically significant negative abnormal returns over the three-year period following the month of the reverse split. The sample firms experience poor operating performances over the four years that include and follow the year of the reverse split, which suggests informational inefficiencies. Because these stocks have unique financial characteristics, we also show that they would be very difficult to sell short. Thus, arbitrageurs would be restricted in their ability to earn abnormal profits, even if they correctly anticipated a price decline.
... exhibit a lower degree of initial return (or underpricing). Unfortunately, these studies ge... cumulative market-adjusted buy-andhold abnormal return. By specifying different dependent variable...
In the recent past, the automotive supply industry has been facing increasing merger activity. This paper examines the short- and long-term wealth effects of horizontal mergers and acquisitions on acquirers in the automotive supply industry. Based on a sample of 230 takeover announcements between 1981 and 2007, significant positive announcement returns to acquiring companies were determined. While these positive short-term returns to acquirers represent an outstanding attribute of this industry in terms of perceived synergy potential, this study also finds that acquirers are unable to sustain this exceptional position beyond a short-term horizon. A combination of the Fama-French-3-Factor model in calendar time and the control firm approach in event time consistently reveals significant ...
... associated with studies on long-term abnormal performance, evidence from other industries remain...
... on the basis of their ability to generate returns not just relative to competitors but vis-a-vis a c... value in a way that would create abnormal returns for their funds. Second, only Coconut Fixe...
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