The Competitive Effect of Rivals’ Earnings News on Initial Public Offerings
نویسندگان
چکیده
We examine the effects of rivals’ earnings news during the waiting period of an IPO’s going public process on IPO pricing and completion decision, and investigate the implication of these effects for post-IPO operating performance. We find that a signal-to-noise measure of rivals’ earnings news has significantly negative valuation effects on both price revision and initial return for completed offerings, but a significantly positive effect on withdrawal probability in a pooled sample of completed and withdrawn offerings. We further show that industry-adjusted post-IPO operating performance of completed offerings is positively associated with this measure. Our results suggest that rivals’ earnings news has a competitive effect on new issues and good quality offerings are more likely to bear the negative valuation effects in going public and thus subsequently have relatively better post-IPO profitability. JEL Classifications: G12, G14, G24
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