Associations Between Management Forecast Accuracy and Pricing of IPOs in Athens Stock Exchange

Abstract

This study examines the earnings forecast accuracy of newly listed companies on the Athens Stock Exchange and further investigates the relationship between earnings forecast and pricing of IPOs. It uses a unique data set of 208 IPOs, which were floated during the period of January 1994 to December 2001 in the Athens Stock Exchange. The results suggest that investors are able to anticipate forecast errors at the time of listing. Pricing of IPOs indicate that firms with negative earnings forecast (pessimistic) are associated with low level of underpricing while optimistic management earning forecast can be a signal for high initial returns. Three variables -age of the IPOs, ownership by insiders and industry classification significantly contribute towards accuracy of earnings forecast.

Ownership Structure and Earnings Forecast Accuracy: Evidence from Malaysian IPOs

“…The OLS regression model is defined by the following equation: The absolute forecast error is however lower than the result reported by [2] in their study of 64 Malaysian IPOs during economic recovery period (AFE = 26.35 percent) and higher than the same market IPOs during the crisis period (AFE = 31.56 percent, n = 65). Comparatively, the mean absolute forecast error is 42.82 percent for Greece forecasts [7], 163.4 percent for Jordanian forecasts [21], 49.05 percent for Indonesia forecasts [22], and 35.76 percent for Thailand forecasts [23]. Finding by this study suggests that Malaysian IPO forecast accuracy is at moderate level compared to other countries.…”

“…In the context of different types of ownership, prior works examining the link between type of ownership structure and earnings forecast disclosure tends to focuses either on the institutional ownership [15], [16], management ownership [6], [17], or equity retained by owners [7], [8], [18] separately and found no relationship between ownership type and the accuracy of forecasts. This study on the other hand examines the impact of various ownership types including active-family ownership on the accuracy.…”

The accuracy of earnings forecast in IPO prospectuses: Evidence from Indonesia

“…The results studies in the United Kingdom (Gounopoulos, 2011), Thailand (Lonkani & Firth, 2005), Malaysia (Ahmad Zaluki & Wan Hussin, 2010), England (Jelic, 2014) and Greece (Boubaker et al, 2016) show that there is a significant positive relationship between the accuracy of earnings forecast with company size. Companies with a large scale of business and assets tend to control the market and less affected by fluctuations in the market.…”

Earnings Forecasts Errors in Malaysian IPO Prospectuses: Evidence and Explanations

“…Earnings forecasts can mitigate information asymmetries and illustrate the financial position of IPO companies to the potential investors (Gounopoulos, 2011). However, a significant over-forecasting of the management earnings forecast could result in misguiding the investors and other users like financial analysts.…”

“…This paper contributes to the management earnings forecasts and IPO literature. More importantly, there is a lack of prior studies related to investigating IPO earnings forecasts (Gounopoulos, 2011). Furthermore, the issue of explanations provided by directors in the first annual report after IPO has not been extensively investigated in the available literature.…”