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Long-Run Operating Performance of Initial Public Offerings in Japanese Over-the-Counter Market (1991–2001): Evidence and Implications

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Author Info
Daying Yan ()
Jun Cai
Abstract

This paper implements a comprehensive study on the long run post-issue operating performance of more than 700 initially public offerings (IPOs) in the Japanese over-the-counter market (JASDAQ) from 1991 to 2001. Empirical results document dramatic and continuing operating underperformance that are robust to industry or mean reversion adjustment. The diagnostic tests for behavioral explanations further uncover the salient decline of market expectations by various measures over the post issuing years, as well as the upsurge in company expansion around the offering years followed by the striking dwindle soon afterwards. These findings jointly shed light on the systematic over-optimism of market investors and managers at the time of IPO events. The multiple regression analysis also demonstrates robust evidence that is favorable for the hypotheses of “Windows of Opportunity” and market timing. In contrast, we do not find that there are significant associations between changes in alternative insider ownership and the evolution of operating performance. We suggest the explanations based on the agency problem theory are not effective in explaining the long run operating underperformance of JASDAQ IPOs. Copyright Springer Science + Business Media, Inc. 2003

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File URL: http://hdl.handle.net/10.1007/s10690-005-6020-2
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Publisher Info
Article provided by Springer in its journal Asia-Pacific Financial Markets.

Volume (Year): 10 (2003)
Issue (Month): 2 (September)
Pages: 239-274
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Handle: RePEc:kap:apfinm:v:10:y:2003:i:2:p:239-274

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Related research
Keywords: initial public offerings; market timing; operating performance; ownership structure; windows of opportunities;

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  2. Bradley, Daniel J & et al, 2001. "Venture Capital and IPO Lockup Expiration: An Empirical Analysis," Journal of Financial Research, Southern Finance Association and Southwestern Finance Association, vol. 24(4), pages 465-93, Winter.
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