Different strokes: IPO risk factors, investor valuation, and firm survival

Mousa, Fariss‐Terry; Bierly, Paul E.; Wales, William J.

doi:10.1017/jmo.2014.25

Cited by 6 publications

(3 citation statements)

References 78 publications

(154 reference statements)

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“…Ahmad and Jelic [16] have investigated the impact of lock-up provisions on the IPO survival of the firms listed on the London stock exchange. Mousa et al [49] have studied the impact of risk factors and investor valuation on the survival of US high-tech firms. Ayadi et al [1] have examined the survival of reorganized French firms using conventional determinants of IPO survival.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Predictive Role of Ex Ante Strategic Firm Characteristics for Sustainable Initial Public Offering (IPO) Survival

2021

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This study attempts to predict how long a newly listed corporation, usually termed initial public offering (IPO), will survive on the equity listing market. The three-fold contribution of this study comprises a hand-collected and substantially expanded dataset for listed IPOs (1990–2017) over a maximum tracking period of 31 years (1990–2020) to predict the IPO survival on emerging Malaysian capital market, the rationale and consequences for unifying the two listing boards (Main Board and Second Board) in 2009, and an investigation of the predictive role of ex ante strategic prospectus information as early warning signals for sustainable survival of Malaysian IPOs. We also make comparisons for the survival profile of IPOs listed on different listing equity boards. We use Cox proportional hazard (PH) model to estimate the empirical results because of the cohort research design of the study. Overall empirical results show that survival curves for IPOs listed on Main Board and Second Board were not statistically different. However, Second Board IPOs remained more vulnerable to hazard. The survival curves for IPOs listed on Main Market and ACE Market are statistically different. Empirical results reveal that high share premium, high listed capital, and longer firm age at listing date significantly increase the survival (reduce hazard) of IPOs listed on the Main Market and the Second Board. However, bigger firm size and elevated risk factors significantly reduce the survival (increase hazard) of the listed IPOs mentioned above. However, share premium is the only variable that has a negative and significant correlation with IPO survival on ACE Market. These results have implications for the regulators, prospective investors, and policymakers of emerging markets, where the IPO prospectus disclosures bridge the information asymmetry gap prevailing due to the nonexistence of public information prior to the IPO. Empirical findings of this study can be generalized to other developing and emerging markets where IPO prospectus substantially mitigates information asymmetry and ex ante strategic firm characteristics act as early warning signals in predicting IPO survival.

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Section: Literature Review and Hypothesesmentioning

confidence: 99%

Predictive Role of Ex Ante Strategic Firm Characteristics for Sustainable Initial Public Offering (IPO) Survival

2021

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“…The above findings show the impact of risk disclosures on IPO underpricing. The results of the previous studies are not conclusive because one section of previous studies (Wasiuzzamn et al, 2018;Hussein et al, 2019;McGuinness, 2019;Gaulin, 2017) found the positive impact of risk disclosures on IPO underpricing, whereas the other one (Falconieri and Tastan, 2018;Ding, 2016;Mousa et al, 2014;Campbell et al, 2014) found the negative impact of risk disclosures on IPO performance. This means no clear evidence has been found in the previous studies done over the period of time across various contexts.…”

Section: Resultsmentioning

confidence: 93%

The nexus between risk factor disclosures and short-run performance of IPOs – evidence from literature

Grover

Bhullar

2021

WJEMSD

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PurposeThe main purpose of the present study is to stretch the theoretical framework of existing stock of literature with reference to Risk Disclosures in IPO Prospectus and IPO performance. The systematic literature review study endows easy and quick access to researchers as well as categorization of the available literature.Design/methodology/approachFifty research papers, which has been published or presented from 2000 to 2019 and are related to IPO risk disclosures and IPO performance, have been finalized. Further, these research papers were categorized based upon the five different variables to identify the probable research gap in the selected topic.FindingsThis review provides a coherent summary of past studies related to topic and develop a comprehensive evidence on relationship between disclosure of risk factors and IPO underpricing in short run. It shows the existing research gap that needs to be fulfilled to expand the research horizon of future research studies.Research limitations/implicationsThe sole limitation of the study is that being a systematic literature review study, it does not carry any empirical results.Practical implicationsThe investors will be able to identify the key risk factors, disclosed in IPO prospectus, that may have probable dent on the short-term return from IPO. The findings will further help the investors and financial analyst to identify the degree of impact of risk disclosures that are listed in IPO prospectus.Originality/valueThe paper is a first of its kind to stretch the existing literature and develop theoretical framework in the context of risk factor discloses in IPO prospectus and IPO performance with reference to India. The present study is an attempt to integrate the existing gap between empirical research and existing literature and suggest the techniques to the future practitioners to widen the horizon of their research.

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“…Despite its prominence, idiosyncratic risk doesn't predict future returns, rendering firms with higher idiosyncratic risk less appealing to investors with limited stock holdings. Moreover, external and internal risk factors, including market, legal, and operational risks, as well as management and technical risks, influence investor sentiment and the long-term survival of IPO firms (Mousa et al, 2014). Both external and internal risk factors positively correlate with the probability of firm failure, impacting investor confidence.…”

Section: Idiosyncratic Riskmentioning

confidence: 99%

Cross-influence of Risk, Return, and Governance on Decision-Making in Hydropower Investments

Karki

2024

Econ J Dev Issues

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The sustainable growth of an economy pivots on a robust financial system, particularly in the context of capital availability. This study analyzes the behavior of investors towards initial public offerings (IPOs), focusing on the hydropower development sector in Nepal. The research explores the multifaceted relationship between factors such as risk, return, and governance on investor behavior, considering elements like Idiosyncratic risk (IR), timing of issue (TIPO), Bandwagon effect (BE), expected return (ER), sectoral performance (SP), corporate governance (CG), pre-issue financial health (PFH), and marketability (MKT). Additionally, sociodemographic variables and their connection to investor behavior are examined. Employing a descriptive research design, the study involves a sample size of 392 individuals, selected through a convenient sampling method. The study's main finding documented that idiosyncratic risks, expected returns, and corporate governance stand out as crucial factors influencing investment decisions (P < 0.05). Notably, the regression analysis indicated the absence of a significant impact from market risks (P > 0.05), including the bandwagon effect and IPO timing, on investor behavior towards hydropower IPOs. This finding suggests that Nepalese investors prioritize returns and organizational governance over market risks, despite having significant concerns regarding idiosyncratic risk. The analysis also reveals significant associations between investor behavior and sociodemographic variables like age, education, occupation, and primary investment objectives (P < 0.05). This study offers valuable insights and implications for investors seeking to align investments with their goals. Hydropower developers should prioritize investor protection and transparency, while regulators must enhance disclosures, shareholder accountability, and project oversight.

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Different strokes: IPO risk factors, investor valuation, and firm survival

Cited by 6 publications

References 78 publications

Predictive Role of Ex Ante Strategic Firm Characteristics for Sustainable Initial Public Offering (IPO) Survival

Predictive Role of Ex Ante Strategic Firm Characteristics for Sustainable Initial Public Offering (IPO) Survival

The nexus between risk factor disclosures and short-run performance of IPOs – evidence from literature

Cross-influence of Risk, Return, and Governance on Decision-Making in Hydropower Investments

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