Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
958888 | Journal of Empirical Finance | 2007 | 23 Pages |
Abstract
Purnanandam and Swaminathan [Purnanandam, A., Swaminathan, B. 2004. Are IPOs really underpriced? Review of Financial Studies, 17, 811–848.] find that IPOs are overvalued at the offer price relative to value metrics based on industry peer price multiples. I discuss some possible problems in their valuation methodology and find that IPOs are not overvalued after steps are taken to address the problems. More importantly, when I examine the long-run performance of IPO firms and their industry peers, I find that IPOs do not underperform their industry peers in the 5 years after IPO. This casts doubt to the argument that IPOs are overvalued.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Steven X. Zheng,