This paper analyzes the determinants of initial public offerings (IPOs) in Italy. We compare the ex ante and the ex post characteristics of IPOs with those of a large sample of privately held companies. The likelihood of an IPO is positively related to the company's size and the industry's market-to-book ratio. Companies appear to go public not to finance future investments and growth, but rather to rebalance their accounts after a period of high investment and growth. IPOs are also followed by a reduction in the cost of credit and an increased turnover in control. These findings highlight some important differences between the role played by the equity market in Italy (and likely in other Continental European countries) and in the United States. This paper is part of the research project on "The decision to go public and the stock market as a source of capital," promoted by the Ente "Luigi Einaudi" per gli studi monetari bancari e finanziari. The suggestions we received from Espen E...

Carolina at Chapel Hill for helpful comments and suggestions and Jay Ritter and Michel Vetsuypens for We examine data on analyst following for a sample of initial public offerings completed over the 1975-1987 period to see how they relate to three well-documented IPO anomalies. We find that higher underpricing leads to increased analyst following. Analysts are overoptimistic about the earnings potential of recent IPOs and about their long term growth prospects. More firms complete IPOs when analysts are particularly optimistic about the growth prospects of recent IPOs. In the long run, IPOs have better stock price performance when analysts ascribe low growth potential to these firms than when they ascribe high growth potential. These results suggest that the anomalies documented in the IPO market may, at least partially, be driven by overoptimism. 1 1.

Individual and institutional investors can trade German initial public equity offerings on an as–if/when–issued basis before the start of secondary trading. Using a novel data set of pre – and post–IPO trades made by a sample of clients at a large German retail broker, the paper documents that retail investors both are willing to overpay and end up overpaying for IPOs, especially following periods of high returns in recent new issues. IPOs that are more aggressively bought by retail investors in the pre–IPO market or on the day of the IPO post higher first-day returns, but also experience lower aftermarket returns, controlling for firm characteristics such as size and book–to–market ratio. In short, sentiment – expectations about asset values unwarranted by fundamentals – drives retail purchases of IPOs and appears to have a transitory effect on prices.

Finance and investing is the second most frequent business area of neural networks applications after production/operations. Although many research results show that neural networks can solve almost all problems more efficiently than traditional modeling and statistical methods, there are opposite research results showing that statistical methods in particular data samples outperform neural networks. Many papers on neural network applications on stock markets provide forecast only on existing stocks. However, many new stocks are being listed each year. Thus the aim of this study is to explore this relatively un-tapped region in the stock market and to investigate if neural networks can predict the returns of these IPOs. As for the prediction model, this study uses a proposed sequential learning Radial Basis Function (RBF) and this neural network aims to take advantage of the relationship between time series and firm specific information. Since IPOs have prior information of itself, the predicted values will be based on related time series and variables of the firm specific factors. Experimental results based on IPOs from the Singapore Stock Exchange are presented to evaluate the performance of the prediction. 1.

What role do sentiment investors play in the pricing of newly listed stocks? We derive conditions under which we can distinguish between sentiment and rational pricing behavior and test for the rationality of small investors ’ demand for new stock issues using data from pre-issue (or ‘grey’) markets in Europe. Under sentiment, the model predicts asymmetric relations between the prices at which small investors trade new stock issues in the grey market and i) the subsequent issue price set by the investment bank, ii) prices in the early after-market, and iii) the degree of stock price reversal in the long run. Our empirical results suggest that sentiment demand is present and influences the pricing of newly listed firms.

This study compares the pre- and post privatization financial and operating performance for the complete sample of H-firms that are incorporated in Mainland China and listed in Hong Kong by employing the accounting data. We find that privatization effect is dominant over the external factors (economic growth, macroeconomic condition) in the changes of the key performance proxies. We also document a significant decrease in leverage and some degree increase in dividend payout. However, H-firms experienced a significant decrease in the profitability and the operating efficiency. The results are robust after controlling the external effects and firm-specific effect in OLS regression analysis. We argue that as the state ownership is the major reason of SOEs ’ inefficiency, partial privatization can not improve and it may even deteriorate their operating performance when the state retains the controlling right.

Using a large database of private firms in Italy, we analyze the determinants of initial public offerings (IPOs) by comparing the ex ante and ex post characteristics of IPOs with those of private firms. The likelihood of an IPO is increasing in the company’s size and the industry’s market-to-book ratio. Companies appear to go public not to finance future investments and growth, but to rebalance their accounts after high investment and growth. IPOs are also followed by lower cost of credit and increased turnover in control. THE DECISION TO GO PUBLIC is one of the most important and least studied questions in corporate finance. Most corporate finance textbooks limit themselves to describing the institutional aspects of this decision, providing only a few remarks on its motivation. The conventional wisdom is that going public is simply a stage in the growth of a company. Although there is some truth in it, this “theory ” alone cannot explain the observed pattern of listings. Even in developed capital markets like the United States, some large companies—such as United Parcel Service or Bechtel—are not public. 1 In other countries, like Germany and Italy, publicly traded companies are the exceptions rather than the rule, and quite a few private companies are much * Pagano is with the Università di Salerno and CEPR, Panetta is with Banca d’Italia, and Zingales is with the University of Chicago, NBER, and CEPR. This paper is part of the research project on “The decision to go public and the stock market as a source of capital, ” promoted by the Ente “Luigi Einaudi ” per gli studi monetari bancari e finanziari. The suggestions we received

Abstract: This paper analyzes the relationship between investors ’ divergence of opinion and the valuation of IPOs both in the short run and in the long run. Merton (1987) argues that divergence of opinion captures the inherent risk and thus should be positively related to the long run performance of assets while Miller (1977) presents that divergence of opinion will fuel the asset pirce irrationaly in the short run and will lead to the long run underperformance. Using a sample of 667 IPO firms from 2001 to 2009 in Chinese stock market, we examine the relationship between divergency of opinion and IPO valuation. Using the average price of analysts ’ forecasts as fair value of IPOs, we divide the abnormal initial return of IPOs into two parts: underpricing in the primary market and overvaluation in the secondary market. We find that the divergence of opinion affects underpricing in the primary market as a risk factor and also overvaluation in the secondary market through the optimistic investors. The dispersion of analysts ’ forecasts, the turnover rate on the first trading day and the aftermarket volatility of IPOs, proxies for the divergence of opinion among investors, are positively related to underpricing in the primary market and overvaluation in the