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IPO performance and earnings expectations: some French evidence

IPO performance and earnings expectations: some French evidence

Fama, E.,

Fama, E., and K. French, 1992, The cross-section of expected stock returns, Journal of Finance 47, 427-465. Fama, E., and K. French, 1993, Common risk factors in the returns to stocks and bonds, Journal of Financial Economics 33, 3-56. Jain, B., and O. Kini, 1994, The post-issue operating performance of IPO firms, Journal of Finance 49, 1699-1726. Jenkinson, T., and A. Ljungqvist, 1996, Going public: the theory and evidence on how companies raise equity finance, Clarendon Press. Krigman, L., W. Shaw, and K. Womack, 1999, Why do firms switch underwriters?, mimeo. Lim, T., 2001, Rationality and analyst’s forecast bias, Journal of Finance 56 (1), 369-385. Loughran, T., and J. Ritter, 1995, The new issue puzzle, Journal of Finance 50, 23-51. Michaely, Roni, and Kent L. Womack, 1998, Conflicts of interest and the credibility of underwriter analyst recommendations, forthcoming, Review of Financial Studies. Pagano, M., Panetta, F., and L. Zingales, 1998, Why do companies go public? An empirical analysis, Journal of Finance 53 (1), 27-64. Rajan, R., and H. Servaes, 1997, Analyst following of Initial Public Offerings, Journal of Finance 52 (2), 507-529. Ritter, J., 1991, The long-run underperformance of Initial Public Offerings, Journal of Finance 46, 3-27. Ritter, J., 1998, Initial Public Offerings, Contemporary Finance Digest. 28

Table 1 Type and source of the variables used in the study The sample consists of 243 IPOs that occurred on the French Second Marché and Nouveau Marché between January 1991 and July 1998. Type of variable Variable Description Variable source Performance variables - Daily return of IPO firms Ex ante firm-specific variables Post-IPO earnings and earnings forecasts - Daily returns of all firms on “Second Marché” and “Marché au Comptant” - Daily values of MIDCAC index - Daily values of industry indices - IPO year - Exchange (NM or SM) - IPO procedure (PG, OPM or OPF) - Lead underwriter’s rank - Announced reasons for going public - % of shares created (%) - Initial return (10 days) - Market conditions at IPO date - Firm size (log(market capitalization)) at IPO date - Age of the firm at IPO date - Book-to-market ratio at IPO date - Long term debt at IPO date - Shareholders before IPO - Earnings per share forecast (in pre-IPO prospectus) - Earnings per share forecast (by analysts) for IPO firms - Earnings per share forecast (by analysts) for non-IPO firms - Analyst affiliation - Actual earnings per share for IPO firms - Actual earnings per share for non-IPO firms 29 Paris Bourse daily prices database Pre-IPO prospectuses Pre-IPO prospectuses I/B/E/S analyst-by-analyst historical earnings estimate database I/B/E/S analyst-by-analyst historical earnings estimate database I/B/E/S analyst-by-analyst historical earnings estimate database I/B/E/S consensus database I/B/E/S consensus database

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