Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 11, 2022 erstellt
Beschreibung:
We examine the performance of initial public offerings (IPO) using a stochastic dominance approach that allows us to capture IPO investors’ preferences for higher moments of the returns distribution. We use a comprehensive sample of 6,671 IPOs in the U.S. with IPO dates from 1980 to 2012, and long-run returns extending to 2017. We confirm that IPOs underperform the market value-weighted and equal-weighted portfolios. However, we find no evidence that IPOs underperform size and book-to-market matched portfolios. We also account for IPO capital backing, including venture capital (VC) backing, the quality of the VCs, and lender backing. The results show that the market portfolios do not second-order stochastic dominate IPOs with VC-backing, IPOs backed by high reputation VCs, and low debt IPOs. We also examine the IPO performance in different economic situations and find that market indexes second-order stochastic dominate IPOs without VC-backing and high debt IPOs during booms and recessions, but not VC-backed or low debt IPOs. We find that the market second-order dominates IPO firms that go public in times of high sentiment, but not in times of low sentiment. Firms with no VC backing dominate VC-backed firms that go public in times of high sentiment, which is the only setting in which no-VC-backed firms perform better. Overall, our results shed additional light on the role of investor preferences for higher order moments in IPO performance evaluation