by Paul Snyder

Abstract

This paper answers which available information about the company, macroeconomic and market environment, regulatory constraints, and offering before an IPO is most impactful on year-long buy-and-hold abnormal returns and how that changes across time while analyzing the IPO markets of 1999 and 2019. Data was gathered from predominantly company prospectuses and proprietary datasets to select a total of 419 IPOs across two samples and regress abnormal geometric returns against the aforementioned information using multivariate OLS regressions. There are a number of interesting findings. First, certain information or factors that act as signals of stock performance before an IPO that correlate with stock performance change across time. Second, there is evidence that companies abiding by more regulation pre-IPO tend to perform better on the stock market after the fact, particularly with the Sarbanes-Oxley and JOBS Acts. While the direction of causality is unknown, there is now a clear and quantified relationship between IPO regulation requirements and stock performance. Third, there is evidence that the IPO market has become more strong-form efficient when comparing 1999 to 2019.

Professor Edward Tower, Faculty Advisor
Professor Grace Kim, Faculty Advisor

JEL Codes: G1, G12, G14

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