Myth or Reality? The Long-Run Underperformance of Initial Public Offerings: Evidence from Venture and Nonventure Capital-Backed Companies.
The authors investigate the long-run underperformance of recent initial public offering (IPO) firms in a sample of 934 venture-backed IPOs from 1972 to 1992 and 3,407 nonventure-backed IPOs from 1975 to 1992. They find that venture-backed IPOs outperform nonventure-backed IPOs using equal weighted returns. Value weighting significantly reduces performance differences and substantially reduces underperformance for nonventure-backed IPOs. In tests using several comparable benchmarks and the Fama-French (1993) three factor asset pricing model, venture-backed companies do not significantly underperform, while the smallest nonventure-backed firms do. Underperformance, however, is not an IPO effect. Similar size and book-to-market firms that have not issued equity perform as poorly as IPOs. Copyright 1997 by American Finance Association.
Year of publication: |
1997
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Authors: | Brav, Alon ; Gompers, Paul A |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 52.1997, 5, p. 1791-1821
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Publisher: |
American Finance Association - AFA |
Saved in:
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