IPO Prospectus Information and Subsequent Performance
Article first published online: 15 JUL 2003
Volume 38, Issue 3, pages 369–397, August 2003
How to Cite
Bhabra, H. S. and Pettway, R. H. (2003), IPO Prospectus Information and Subsequent Performance. Financial Review, 38: 369–397. doi: 10.1111/1540-6288.00051
- Issue published online: 15 JUL 2003
- Article first published online: 15 JUL 2003
Initial public offerings underperform in the long run; however, there is very little evidence on their cross-sectional variation. Using a random sample of IPOs from 1987 through 1991 and gathering their prospectus data, we show that financial and operating characteristics as well as offering characteristics have a limited relation with the one-year stock returns. We also find that firms that subsequently reissue equity or merge outperform their matched-firm benchmarks over three years. Underperformance is most severe for the smaller and younger firms. We find that prospectus information is more useful to predict survival/failure compared to subsequent equity offerings or acquisitions.