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