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Cited by 196Financial Markets and Investment StrategiesCorporate Finance and GovernanceAuditing, Earnings Management, Governance

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IPO Failure Risk

DEMERS, ELIZABETH, JOOS, PHILIP·2007·Journal of Accounting Research
DOI 10.1111/j.1475-679x.2007.00236.x
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Abstract

We explore the factors associated with historical IPO failures by developing an IPO failure prediction model that includes accounting information as well as proxies for the role of information intermediaries and other IPO deal–related characteristics. We document statistically significant differences in failure models applicable to nontech versus high tech IPOs, and these structural differences are largely driven by accounting‐based proxies for firms' investments in intangible assets, operating performance, and financial leverage. We also develop parsimonious, predominantly accounting‐based, strictly out‐of‐sample (i.e., no hindsight) IPO failure forecasting models for each of the two sectors. We find that our forecasts are negatively associated with one‐year post‐IPO abnormal returns. A pseudo‐hedge strategy of going short (long) in high (low) failure risk portfolios yields returns of economically significant magnitudes over the one‐year horizon, and is robust to alternative returns methodologies. Further results suggest that IPO long‐run returns anomalies may persist, but they take different forms for high‐tech and nontech IPOs.

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Metadata

Authors
DEMERS, E., & JOOS, P.
Affiliations
  • INSEAD (FR)
  • Tilburg University (NL)
ORCID
Venue
Journal of Accounting Research
Publisher
Wiley
Published
2007-03-16
Volume
45
Issue
2
Pages
333-371
ISSN
  • 0021-8456 (ISSN-L)
  • 1475-679X
DOI
10.1111/j.1475-679x.2007.00236.x
OpenAlex
W3121415401
Cited by
196
References
2
Citations by year
2026: 6 · 2025: 12 · 2024: 5 · 2023: 12 · 2022: 12 · 2021: 8 · 2020: 11 · 2019: 12 · 2018: 7 · 2017: 6 · 2016: 12 · 2015: 13 · 2014: 11 · 2013: 10 · 2012: 17
FWCI
18.34
Type
journal article
Language
en
Open access
closed
Licence
onlinelibrary.wiley.com/termsAndConditions#vor (vor)
Locations
Journal of Accounting Research (publishedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
  • Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
  • Social Sciences › Business, Management and Accounting › Accounting › Auditing, Earnings Management, Governance
Keywords
initial public offerings, intangible assets, leverage, operational performance, information intermediaries, high-tech enterprises, short-selling strategy, IPO underpricing

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