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The study examines the IPO resilience grounded on the firm’s intrinsic factors.

We examine the association of IPO performance and post-listing firm’s performance with issuers' pre-listing financial and qualitative traits using panel data regression.

IPOs floated in the Indian market from July 2009 to March 31, 2022, evince the notable influence of issuers' pre-IPO fundamentals and legitimacy traits on IPO returns and post-listing earning power. Where the pandemic’s favorable impact is discerned on the post-listing year earning power of the issuer firms, the loss-making issuers appear to be adversely affected by the Covid disruption. Perhaps, the successful listing equipped the issuers with the financial flexibility to combat market challenges vis-à-vis failed issuers deprived of desired IPO proceeds.

High initial returns followed by a declining pattern substantiate the retail investors to be less informed vis-à-vis initial investors, valuers and underwriters, who exit post-listing after profit booking. Investing in the shares of the newly listed ventures post-listing in the secondary market can shield retail investors from the uncertainty losses of being uninformed. The IPO market needs stringent regulations ensuring the verification of the listing valuation, the firm’s credentials and the intent of utilizing IPO proceeds. Healthy development of the IPO market merits reconsidering the listing of ventures with weak fundamentals suspected to withstand the market challenges.

Given the tremendous rise in the new firm venturing into the primary market and the spike in IPOs countering the losses immediately post-opening, the study examines the loss-making and young firms IPOs separately, adding novelty to the study.

This paper aims to provide a chronological review of changes in the institutional setting regulating Australian initial public offering (IPO) firms’ earnings forecasts over the period from 1994 to 2012. The changing forecasting environment covers both IPO firms’ prospectus earnings forecasts and post-listing updates to those forecasts.

This historical analysis reviews the changes in corporate regulation and enforcement, Australian Securities Exchange listing requirements and the outcomes of securities class actions (SCA) that affect IPO firms’ earnings forecasts.

A review of the institutional setting regulating Australian IPO firms’ earnings forecasts reveals two inter-temporal shifts in (increasing) litigation risk over 1994-2012 period which have arisen from more onerous regulations, stronger regulatory enforcement and a more active SCA market. The authors document the corporate responses to those shifts.

This is the first study to comprehensively document research of an inter-temporal litigation risk shift on IPO firms’ earnings forecasting behaviour. It therefore provides a formative base and a useful resource for researchers, practitioners and investigators (regulators, forensic accountants, etc.) when examining the impact of the changes on IPO firms’ forecasting behaviour following regulatory change and enforcement.

The strong performance of New Zealand’s equity market and the Government’s efforts to encourage small investors to invest in initial public offering (IPO) firms raises two questions: should retail investors invest in IPO offers and what types of IPOs are worth buying in the long term? The paper aims to discuss these issues.

The authors construct buy and hold equally weighted portfolios of IPOs and peers based on sales forecast, market capitalisation, and price-to-book ratio. The authors employ four benchmark-adjusted performance measures: cumulative average abnormal return (CAR), holding period return difference, wealth relative, and excess return (α).

IPOs underperform their peers over the medium and long term, with a five-year CAR ranging between −6.4 and −19.7 per cent. IPOs listed post-GFC show inferior benchmark-adjusted performance with a statistically significant average monthly CAPM α of −1.07 per cent (vs −0.13 per cent for pre-2009 IPOs). Over a five-year horizon, mature IPOs, IPOs with high market cap, high sales forecast, high leverage, low price-to-book ratio, and positive earnings forecast outperform other IPOs. Small IPOs or those with a small degree of leverage exhibit the worst five-year CAR ranging between −30.2 and −49.1 per cent. Of all IPOs examined, large firms, well-established firms, and value firms achieved positive five-year CARs of between 6.6 and 17.5 per cent.

The results are useful for retail investors and financial advisors in making sensible investment decisions.

This study is the first to utilise book-to-market and sales forecast to construct peer samples and to identify the red flags for IPO downfalls in New Zealand. It covers the longest sample period (1991-2015) in New Zealand’s context.

The purpose of this paper is to analyze the long-term performance of construction sector initial public offers (IPO) made in India during 2006–2015. The study aims to compare the performance of the construction sector IPOs with the non-construction sector IPOs and finds the determinants of long-term performance of construction sector IPO with a time horizon of three years. The study also attempts to find out, if the long-term IPO underpricing that has been discussed in the literature, really exists or it is a myth.

The study uses data of IPOs listed on National stock exchange during 2006–2015. In total, 281 IPOs are considered for the study, among which 44 are construction sector IPOs. IPOs anniversary performance of three successive years is calculated from the date of listing, and a random effect panel regression model with clustered robust estimates using the maximum likelihood method is performed to find out the determinants of IPO performance. The data are also tested for multicollinearity, stationarity and heteroscedasticity to ensure the robustness of results.

The results show that in the long-run construction sector IPOs outperform the non-construction sector IPOs, though the performance is below average when compared to market returns. The IPO underpricing is a myth, and IPO underperformance is a reality in India. The performance of construction sector IPOs is driven positively by market return, size of the firm and negatively by liquidity of the firm.

The paper is the first attempt to analyze the performance of construction sector IPOs, and compare it with non-construction sector IPOs. The study uses a random effect panel regression model with robust estimates using the maximum likelihood method to ensure the robustness of results. This is the first time the performance of IPOs is studied with a panel data approach.

This study examines the accuracy and bias of profit forecasts disclosed in prospectuses by New Zealand companies for initial public offerings during the period 1987 to 1994. The results show that profit forecasts in this period are, on average, more accurate titan those disclosed prior to 1987, which were examined in prior studies. However, the results reject the null hypothesis that profit forecasts are accurate. In examining forecast bias, the evidence shows that the forecasts are, on average, somewhat pessimistic, but not sufficiently to reject the hypothesis that profit forecasts are unbiased. Tests of the determinants of error show that larger companies make more accurate forecasts, and forecasts made in the year 1987 are less accurate than in other years. Tests of the determinants of bias show that forecasts made in 1987 are also more optimistic, and that companies with longer trading histories and pessimistic forecasts make less biased forecasts. Forecast period and industry type are not significantly related to error or bias.

This study examines whether a regulation on mandatory disclosure of financial forecasts since June 1991 and further sanction imposition since March 1998 contribute to lower IPO firms’ initial and aftermarket returns, and shorten honeymoon periods. The study is based on 423 IPO firms after the regulation required them to disclose their forecasts and 53 IPO firms prior to the regulation. The findings report that initial and aftermarket returns are lower, and honeymoon periods are shorter in the post‐regulation period than those in the pre‐regulation. The findings also report that initial and aftermarket returns are relatively smaller, and the honeymoon periods are shorter after the March 1998 regulatory sanction was imposed after controlling other variables. These results document that the financial forecasts disclosure regulation evidently contributes to mitigating information asymmetry.

This case study is related to start-up post-listing investment analysis. Through this case study, students will be able to perform the business analysis guided by the Venture Evaluation Metric tool, perform financial analysis using the discounted cash flow methods and perform investment analysis recommendation with justifications from the business and financial analysis performed above.

This case study sets out the study of a scalable start-up, Zomato, which is a successfully listed start-up firm in India. Despite the start-up development success in the pre-listing, the firm has exhibited a continuous unprofitable finance performance in the post-listing and has further experienced a volatile share price performance, both of which have puzzled existing and potential investors. In addition, some analysts are in the opinions that the firm share price valuation have been inflated with overvaluation since in the initial public offering stage and remain traded with overvaluation in the market. Notably, considering the negative indicators mentioned above, investors are concerned about long-term sustainability of the firm business and financial performance. In the context of post-listing investment, the following questions are material to investors: What is the realistic growth trajectory for Zomato in the medium term? What is Zomato’s share fair value in the medium term? Can one see opportunities or risks ahead of investing in Zomato’s shares? What will be the investment strategy for new investors?

This case study is suited to bachelor’s and master’s level in business schools studying entrepreneurial finance analysis.

Teaching notes are available for educators only.

CSS 1: Accounting and finance.

This paper examines the relationship between the extent and quality of the four dimensions of corporate social responsibility disclosure (CSRD) namely community, environment, workplace and marketplace with the long-run share price performance of Malaysian initial public offering (IPO) companies.

This study utilised secondary data by the content analysis of the annual reports and Datastream of 115 IPOs listed from 2007 to 2015 in Malaysia. The IPO’s performance was determined by calculating the return measures under the equally weighted and value-weighted schemes of the mean abnormal returns and buy-and-hold abnormal returns covering the three years post-listing using the event-time approach.

The findings demonstrate that Malaysian IPOs experience substantial overperformance and underperformance when both the IPO performance measures are benchmarked against the matched companies and market. The results indicated that the extent and quality of the community and environment CSRD dimensions are positively and significantly correlated to the IPO’s performance. On the other hand, the extent and quality of the workplace and marketplace CSRD dimensions are negatively and significantly correlated to the IPO performance.

Malaysian regulators could benefit from these findings in their endeavour to carry out a reform process on CSRD to improve its quality. The results of this study are important to investors, regulators, non-government organisations, communities and policymakers. They also enhance the understanding of companies about the importance of disclosing greater CSR information to improve their performance and profitability.

To the researchers' best knowledge, this study provides new insights into the association between CSRD and the performance of Malaysian IPO companies, which is considered important.

The purpose of this study is to examine the influence of underwriter reputation on the valuation of Malaysian initial public offerings (IPOs).

This study employed cross-sectional multiple regression models to analyse the relationship between underwriter reputation and IPO valuation that included 466 IPOs listed on Bursa Malaysia from 2000 to 2017.

The results revealed that underwriter reputation had a significant negative association with IPO valuation. Firms that engaged the services of reputable underwriters had their IPO offer prices set lower than the intrinsic values during the listing. After incorporating firms' size, this study found a positive relationship between underwriter reputation and IPO valuation. Big firms (high quality) hired reputable underwriters for certification purposes as issuers were aware that the cost of hiring a reputable underwriter would be justified by increased transparency after listing. Therefore, firms that engaged reputable underwriters had approximately fair values since issuers assumed that the price would be close to the intrinsic value following enhanced transparency post-listing.

Future studies should focus on other non-financial factors, such as auditor reputation.

The present study provides new insights into the certification role of underwriters in valuing IPOs in the Malaysian market.

This study aims to evaluate the earnings forecasting models of Hou et al. (J Account Econ, 53:504–526, 2012) and Li and Mohanram (Rev Account Stud, 19:1152–1185, 2014) in terms of bias and accuracy and validity of the implied cost of capital (ICC) estimates for a sample of initial public offerings (IPOs).

The authors use a sample of 1,657 NYSE, Amex and Nasdaq IPOs from 1972 to 2013.

The models of Hou et al. and Li and Mohanram produce relatively inaccurate and biased earnings forecasts, leading to unreliable ICC estimates, particularly for small and loss-making IPOs that constitute the bulk of new listings. As a remedy, the authors propose a new earnings forecasting model, a combination of Hou et al.’s and Li and Mohanram’s earnings persistence models, and show that it produces more accurate and less biased earnings forecasts and more valid ICC estimates.

The study contributes novel results to the literature on the validity of cross-sectional earnings models in forecasting IPO firm earnings and estimating the ICC. The findings are directly relevant for practitioners, who can improve their earnings forecasting accuracy for IPO firms and related ICC estimates. The insights can be extended to other settings where investors have limited access to financial information, such as acquisitions of private targets.