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IPO performance and earnings expectations: some French evidence

IPO performance and earnings expectations: some French evidence

The results that appear

The results that appear in Panel C do not support our hypothesis. When we regress abnormal returns on Analyst Forecast Errors by analyst affiliation, we observe no significant difference between the β coefficients obtained. 7. Conclusion The long run performance of IPOs has recently attracted considerable attention. We examine this question on a new database of French IPOs conducted between 1991 and 1998. We find that IPOs in our sample performed normally relative to a variety of benchmarks. Moreover, we find that no subcategory of IPOs appears to underperform -- or overperform – over the entire 36-month period, at least when the subcategories are defined using information known at the time of the IPO. We conclude that investors' expectations at the time of new offerings are correct. Next, we ask whether these expectations are embodied in the earnings forecasts issued at the time of the IPO. We find that contrary to forecasts issued in pre-IPO prospectuses, analyst forecasts issued around IPO date are a good proxy for investor’s expectations. 26

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