The Post-Issue Operating Performance of IPO Firms




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    • Jain is from Towson State University, and Kini is from Emory University. We are grateful to Tim Loughran, Shehzad Mian, Chris Muscarella, Keith Ord, Jay Ritter, Dennis Sheehan, Greg Waymire, seminar participants at the 1993 Financial Management Association Meetings, the editor (René Stulz), and two anonymous referees for providing helpful comments and suggestions. Janki Kini provided valuable research assistance. We are responsible for any remaining errors.


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.