Title

An analysis of the stock market performance of new issues in New Zealand

Document Type

Journal article

Source Publication

Pacific Basin Finance Journal

Publication Date

2-1-1997

Volume

5

Issue

1

First Page

63

Last Page

85

Keywords

Initial public offerings, New issues, Profit forecasts, Stock market performance

Abstract

This study measures abnormal stock market returns of unseasoned new issues on the New Zealand Stock Exchange. Substantial positive abnormal returns are obtained on the first listing day and this finding is similar to that reported in other nations. Initial market valuations are related to the profit forecasts contained in prospectuses. The provision of IPO profit forecasts in New Zealand is an important signal of company value. Long-run performance is measured by comparing the returns on new issues and returns on a benchmark made up of matched companies over periods of one, three, and five years. On average, the new issues significantly underperform the market. The level of long-term underperformance is significantly related to profit forecast accuracy, corporate earnings and cash flows, and growth rate.

DOI

10.1016/S0927-538X(96)00026-1

Print ISSN

0927538X

Publisher Statement

Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Language

English

Share

COinS