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IPO performance and earnings expectations: some French evidence

IPO performance and earnings expectations: some French evidence

Table 3 The impact of

Table 3 The impact of ex-ante factors on l ong-run performance The dependent variables are Cumulated Average Returns relative to portfolios of companies of similar sizes and book-to-market over 6-month, 12-month, 18-month, 24-month, 30-month and 36-month periods. The explanatory variables are: Age, the age of the company at IPO date, in years. % of shares created, the ratio of shares created at the date of the IPO to the total number of shares issued. Book-to-market, the ratio of book value of equity to market value of the firm. Long-term debt, the ratio of long term debt to book-value at IPO date. Size, the natural log of market capitalization expressed in thousands of French Francs. Exchange, a dummy variable equal to 1 for firms going public on the Second Marché, 0 for IPOs on the Nouveau Marché. Underpricing/conditions is constructed using the Initial return (10-day underpricing) and Market conditions variables used in the previous tables. Both variables are divided into quartiles, and Underpricing/conditions is equal, for a given IPO, to its Initial return (10-day underpricing) quartile minus its Market conditions quartile. Thus, Underpricing/conditions reflects the initial aftermarket performance of the offering relative to the market conditions prevailing at IPO date. Rank underwriter is determined for each underwriter using the number of IPOs from our sample in which he was the lead underwriter. Goal-fina, goal-acqu and goal-exit are dummies equal to 1 when the announced reason for going public is respectively to improve the firm’s financial structure, to acquire a company, or to allow the main shareholders to get out of the firm’s capital. K-ventur, k-bank and k-perso are dummy variables equal to 1 respectively if more than 10% of the shares are held by capital-venture funds, more than 10% of the shares are held by banks, and more than 90% of the shares are held by managers of the firm prior to the IPO. OPM, PG and OPF are the 3 IPO procedures available in France. They are respectively an auction, a procedure equivalent to the American book-building, and a fixed-price mechanism. * (and, respectively, **, ***) indicates that the coefficient is significantly different from 0 at a 10% (and, respectively, 5%, 1%) level (using White-consistent t-statistics). 32 6-month performance 12-month performance 18-month performance Firm and IPO characteristics Age -0.0012 -0.0039* -0.0043 % of shares created -0.0648 -0.1745 -0.2536 Book-to-market -0.3414** -0.3166* -0.2117 Long-term debt -0.1526 -0.1261 -.03550 Size -0.0354 -0.0367 -0.0163 Exchange 0.0741 -0.0529 -0.2263 Underpricing/conditions 0.0817*** 0.1154*** 0.1308*** Underwriter rank -0.0007 -0.0091 -0.0027 Announced IPO reasons Goal-fina -0.0989 -0.0664 -0.0227 Goal-acqu 0.0523 0.0630 -0.0099 Goal-exit 0.2700** 0.1282 0.1557 Pre-IPO shareholders K-bank 0.1843* 0.2216* 0.4371*** K-perso 0.1385 0.0740 0.2040 K-venture -0.1265 -0.3355** -0.1478 Procedure dummy variables OPM -0.1756 -0.0987 -0.0872 PG 0.0217 0.0871 -0.0246 IPO year dummy variables IPO93 -0.3407** -0.5059* -0.5734 IPO94 -0.3045** -0.3709 -0.4792 IPO95 -- -- -- IPO96 -0.0463 -0.2386 -0.2601 IPO97 -0.2477* -0.3934 -0.5752* IPO98 -0.3994** -0.5797** -0.5088 Constant term -0.7704 1.148 0.4812 # of observations 161 161 160 R square 0.27 0.30 0.23

33 24-month performance 30-month performance 36-month performance Firm and IPO characteristics Age -0.0037 -0.0038 0.0028 % of shares created -0.2038 -0.1214 -0.0705 Book-to-market 0.0274 0.1407 -0.6810 Long-term debt -0.7326 -1.2182** -0.3128 Size 0.0330 -0.0262 -0.0997 Exchange -0.4684 -0.4623 -0.6159 Underpricing/conditions 0.1149* 0.1341 0.0177 Underwriter rank -0.0015 0.0078 0.0290 Announced IPO reasons But-strfi 0.1953 0.1976 -0.0406 But-acqui 0.0557 0.0365 0.2255 But-sortie -0.1099 0.1205 0.0210 Pre-IPO shareholders K-bank 0.4150** 0.5109** 0.2763 K-perso 0.1650 0.2519 0.0159 K-venture -0.2707 -0.0486 0.3268 Procedure dummy variables OPM -0.1593 -0.2926 -0.2462 PG -0.1276 -0.1202 -0.4762 IPO year dummy variables IPO93 -- -- -- IPO94 0.2725 0.5930 0.3918 IPO95 0.5958 0.8868* -- IPO96 0.2744 0.4825 -0.7675** IPO97 0.0255 0.4327 -0.8872** IPO98 0.4709 0.6044 -- Constant term -0.2020 0.1690 1.5114 # of observations 155 142 104 R square 0.19 0.17 0.19

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