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IPO performance and earnings expectations: some French evidence

IPO performance and earnings expectations: some French evidence

Panel B:

Panel B: IPO firms only Dependent variable Prospectus forecast error (PFE) Analyst forecast error (AFE) Exchange 0.0425*** (AFE) (2.830) 0.0337* (1.945) Age -0.0004 (-0.444) -0.0003 (-1.010) Book-to-market 0.0202 (1.471) 0.0369** (2.144) Underpricing/conditions -0.0022 (-0.444) 0.0051 (1.046) Log(market capitalization) 0.0091** (2.259) 0.0148*** (3.269) OPM (auction) -0.0017 (-0.147) 0.0103 (1.208) PG (book-building) 0.0072 (0.920) 0.0060 (0.928) Value -0.0066 (-1.489) -0.0087** (-2.205) Number of months -0.0017** (-2.283) -0.0018*** (-3.470) Constant term -0.0554*** (-3.360) -0.0731*** (-3.894) Number of observations 283 399 R square 0.0950 0.1375 36

Table 6 Analyst Forecast Errors and analyst affiliation Earnings forecasts come from the I/B/E/S analyst-by-analyst historical earnings estimate database. For each IPO firm, we take every analyst’s first earning forecast issued before the offering or within the 12-month subsequent period if no earnings announcement has taken place between the IPO and the forecast. Actual earnings per share are taken from the I/B/E/S consensus database. Analyst Forecast Errors (AFE) are calculated using the following formula: AFE = (actual EPS – analyst EPS forecast) / Stock price at forecast date Affiliation refers to the status of the analyst who produced a given observation. It is equal to: - 1 if the analyst who produced the forecast is affiliated with the lead underwriter of the deal and no other forecast was issued for this firm / period, - 2 if the analyst who produced the forecast is affiliated with the lead underwriter of the deal and other forecasts were issued by non-affiliated analysts for this firm / period, - 3 if the analyst who produced the forecast is not affiliated with the lead underwriter of the deal and an affiliated analyst issued a forecast for this firm / period, - 4 if the analyst who produced the forecast is not affiliated with the lead underwriter of the deal and no forecast was issued by an affiliated analyst for this firm / fiscal year. Year 1 (and respectively, year 2, year 3), is the next (and respectively, second next, third next) fiscal year for which earnings per share are announced. In the second table, we show correlation coefficients between EPS forecasts presented in pre-IPO prospectuses and the ones issued by analysts at or around IPO date and taken from the I/B/E/S analyst-by-analyst historical earnings estimate database. In those EPS forecasts, we want the denominators (stock price) to be the same, so we multiply analyst forecasts by (price / IPO price), where price is equal to the stock price at forecast date. * (and, respectively, **, ***) indicates that the coefficient is significantly different from 0 at a 10% (and, respectively, 5%, 1%) level. AFE and type of forecast Affiliation All years 1 2 3 4 # of forecasts 54 387 1320 279 Average forecast error -0.0400*** -0.0203*** -0.0166*** -0.0051** Median forecast error -0.0271 -0.0011 -0.0007 -0.0010 1 st fiscal year following IPO # of forecasts Average forecast error Median forecast error 2 nd fiscal year following IPO # of forecasts Average forecast error Median forecast error 3 rd fiscal year following IPO # of forecasts Average forecast error Median forecast error 19 -0.0120 0.0017 19 -0.0626*** -0.0349 16 -0.0466*** -0.0459 37 184 -0.0052* 0.0006 147 -0.0332*** -0.0065 56 -0.0356*** -0.0115 Correlation between prospectus forecasts and analyst forecasts 597 -0.0058*** 0.0000 503 -0.0248*** -0.0023 220 0.0270*** -0.0032 97 -0.0033 0.0000 95 0.0037 0.0016 85 -0.0171*** -0.0083 Affiliation 1 2 3 4 All years # of observations 0.8697 34 0.7568 265 0.6784 873 0.2713 179

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