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The New Game in Town: Competitive Effects of IPOs

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  • HUNG-CHIA HSU
  • ADAM V. REED
  • JÖRG ROCHOLL

Abstract

We analyze the effect of initial public offerings (IPOs) on industry competitors and provide evidence that companies experience negative stock price reactions to completed IPOs in their industry and positive stock price reactions to their withdrawal. Following a successful IPO in their industry, they show significant deterioration in their operating performance. These results are consistent with the existence of IPO-related competitive advantages through the loosening of financial constraints, financial intermediary certification, and the presence of knowledge capital. These aspects of competitiveness are significant in explaining the cross-section of underperformance as well as survival probabilities for competing firms. Copyright (c) 2010 the American Finance Association.

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Bibliographic Info

Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 65 (2010)
Issue (Month): 2 (04)
Pages: 495-528

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Handle: RePEc:bla:jfinan:v:65:y:2010:i:2:p:495-528

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Cited by:
  1. Astudillo, Alfonso & Braun, Matias & Castaneda, Pablo, 2011. "The Going Public Decision and the Structure of Equity Markets," MPRA Paper 38640, University Library of Munich, Germany.
  2. Boeh, Kevin & Dunbar, Craig, 2014. "IPO waves and the issuance process," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 455-473.
  3. Jain, Bharat A. & Li, Joanne & Shao, Yingying, 2013. "Governance, product market competition and cash management in IPO firms," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 2052-2068.
  4. Bradley, Daniel & Yuan, Xiaojing, 2013. "Information spillovers around seasoned equity offerings," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 106-118.
  5. Chemmanur, Thomas J. & He, Jie, 2011. "IPO waves, product market competition, and the going public decision: Theory and evidence," Journal of Financial Economics, Elsevier, vol. 101(2), pages 382-412, August.
  6. Chod, Jiri & Lyandres, Evgeny, 2011. "Strategic IPOs and product market competition," Journal of Financial Economics, Elsevier, vol. 100(1), pages 45-67, April.

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