Market Underreaction to Free Cash Flows from IPOs
I examine the relation between initial public offering (IPO) long-run stock performance and the amount of cash raised by the firm in the offering. I find that IPOs raising more cash have poorer long-run performance. The result is robust to different measurement methods. The evidence suggests that the market underreacts to free cash flow related agency problems in IPOs. Consistent with this interpretation, I find that IPO long-run performance is more sensitive to the new cash raised in the offering if an IPO firm has lower capital expenditure or higher opening bid-ask spread. Copyright 2007, The Eastern Finance Association.
Year of publication: |
2007
|
---|---|
Authors: | Zheng, Steven X. |
Published in: |
The Financial Review. - Eastern Finance Association - EFA. - Vol. 42.2007, 1, p. 75-97
|
Publisher: |
Eastern Finance Association - EFA |
Saved in:
freely available
Saved in favorites
Similar items by person
-
IPO Underpricing, Firm Quality, and Analyst Forecasts
Zheng, Steven X., (2007)
-
Wealth transfer through private placements : Evidence from China
Lin, Jing, (2019)
-
Ownership dispersion and market liquidity
Jacoby, Gady, (2010)
- More ...