The Post‐Issue Operating Performance of IPO Firms

  • Author(s): BHARAT A. JAIN, OMESH KINI
  • Published: Apr 30, 2012
  • Pages: 1699-1726
  • DOI: 10.1111/j.1540-6261.1994.tb04778.x

ABSTRACT

This article investigates the change in operating performance of firms as they make the transition from private to public ownership. A significant decline in operating performance subsequent to the initial public offering (IPO) is found. Additionally, there is a significant positive relation between post‐IPO operating performance and equity retention by the original entrepreneurs, but no relation between post‐IPO operating performance and the level of initial underpricing. Post‐issue declines in the market‐to‐book ratio, price/earnings ratio, and earnings per share are also documented.

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