Impact of information on winners' curse and long run performance of initial public offerings

2020 ◽  
Author(s):  
Sheena Chhabra ◽  
Ravi Kiran
Keyword(s):  
Initial Public Offerings ◽  
Public Offerings ◽  
Long Run

The Rationale for IPO Lockup Agreements: Agency or Signaling?

2012 ◽  
Vol 15 (03) ◽  
pp. 1250013 ◽  
Author(s):  
Fei Gao ◽  
Mazhar A. Siddiqi
Keyword(s):  
Information Asymmetry ◽  
Initial Public Offerings ◽  
Agency Costs ◽  
Control Agency ◽  
Public Offerings ◽  
Long Run ◽  
Lockup Period

Most Initial Public Offerings (IPOs) feature share lockup agreements, which prohibit insiders and other pre-IPO shareholders from selling their shares for a specified period of time following IPO. We explore possible reasons why some IPO firms voluntarily agree to have a much longer lockup period than other firms. We find evidence that lockup agreements are used to control agency costs. Longer lockups are significantly related to inferior long-run returns and this relationship is stronger for firms that have less reputable underwriters. We find no evidence that lockup agreements are used to signal firm quality and we are unable to relate firm quality, as measured by long-run returns, to information asymmetry variables.

scholarly journals Earnings Management and Performance of IPO Firms: Evidence from India

2019 ◽  
Vol 12 (1) ◽  
pp. 39-58
Author(s):  
Deepa Mangala ◽  
Mamta Dhanda
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Coming Out ◽  
Developed Countries ◽  
Annual Reports ◽  
Financial Reports ◽  
Public Issues ◽  
Public Offerings ◽  
Long Run ◽  
Earnings Performance

Disclosure through corporate annual reports is intended to enhance transparency and reduce information asymmetry during public issues. Ritter (1991) revealed that there is something fishy in the financial reports of the companies coming out with public issues. Earnings management has been recognised as a foremost contributor to such misleading financial reports. The short term overperformance of initial public offerings (IPO) of companies increases the expectations of potential investors and leads to a subsequent decline of performance in long run leaving the investors in distraught. The observed phenomenon is omnipresent and thus affects the investors across the globe. The present article empirically investigates the presence of earnings management in IPOs in India. The study is based on Modified Jones Model, the best known model to measure accruals earnings management. Preliminary results exhibit that earnings management in Indian IPOs is much higher than in developed countries. The study further discovers that the earnings performance of IPO companies is abnormally higher in IPO year as compared with post-offer period. Both the results taken together reinforce that post-issue earnings performance is a derivation of issue year earnings management in India.

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