SciELO - Scientific Electronic Library Online

 
vol.47 número2Efectos derrame de la complejidad económica en las tasas de crecimiento del PIB per cápita de los estados Mexicanos, 1993-2013Efectos indirectos de la incertidumbre de la política económica de EE.UU.en América Latina índice de autoresíndice de materiabúsqueda de artículos
Home Pagelista alfabética de revistas  

Servicios Personalizados

Revista

Articulo

Indicadores

Links relacionados

  • En proceso de indezaciónCitado por Google
  • No hay articulos similaresSimilares en SciELO
  • En proceso de indezaciónSimilares en Google

Compartir


Estudios de economía

versión On-line ISSN 0718-5286

Estudios de Economía vol.47 no.2 Santiago dic. 2020

http://dx.doi.org/10.4067/S0718-52862020000200245 

Artículos

Valuing local and dual-class IPOs in the Alternative Investment Market

Valoración de Ofertas Públicas de Venta (IPO) en el Mercado Alternativo de Inversiones

Abdul Wahid1 

Muhammad Zubair Mumtaz2 

Edmund Mantell3 

1School of Business, National University of Modern Languages (NUML). Islamabad, Pakistan

2School of Social Sciences and Humanities (S3H), National University of Science and Technology (NUST). Islamabad, Pakistan

3Lubin School of Business, Pace University. New York, USA

Abstract:

Initial Public Offerings are, by definition, not seasoned securities. They have not been subjected to valuation by the community of investors. It is often difficult or impossible to forecast their future cash flows because most do not have a long history of publicly disclosed financial information. Consequently, valuing IPOs in any market is more difficult than valuing seasoned equities. In this paper, we address the valuation of IPOs in the Alternative Investment Market, (hereafter the AIM.) The purpose of this study is to determine the observable factors that affect valuation in the AIM. We apply OLS, LASSO regression, and Extreme Bounds Analysis (EBA) techniques on historical accounting data to test our theory of valuation. The statistical sample consists of 2,185 IPOs issued on the AIM between 1995 and 2020. Our findings suggest that the market valuation of IPOs in the AIM is systematically related to a multiplicity of factors. These include earnings per share (EPS) in the after-market, operating cash follow per share, and the percentage of shares issued to the public. The findings of the study have a practical value for investors who are interested in buying IPOs in the AIM.

Keywords: Valuation of IPOs; AIM; Dual-class IPOs; LASSO regression; Extreme Bounds Analysis

Resumen:

Las ofertas iniciales de venta al público (IPOs), por definición, no tienen historia y no han sido valoradas por inversionistas. Por ello, es difícil o imposible realizar proyecciones de flujos futuros, al no existir información financiera pública. Este trabajo centra la valoración en el Mercado de alternativo de inversiones, determinando los observables que afectan la valoración. Aplicamos distintas técnicas econométricas a datos contables de 2,185 IPOs entre los años 1995 y 2020. Nuestros resultados sugieren que las valoraciones se relacionan con diversos factores.

Palabras clave: Valoración; IPOs; Regresión LASSO; Análisis de límites extremos

Full text available only in PDF format.

Texto completo disponible sólo en PDF.

Bibliographic references

Abdullah, J.Z., Zhou, J., Shah, Muhammad Hashim.(2017). "Dual-Class Firms: Evidence from IPOs of Chinese Firms Cross-Listed on US Exchanges". Emerging Markets Finance and Trade. 53 (7), 1691-1704. Recuperado de https://doi.org/10.1080/1540496X.2017.1307103Links ]

Acedo-Ramírez, M., Díaz-Mendoza, A.C., Ruiz-Cabestre, F.(2019). "IPO underpricing in the second and main markets: The case of the London Stock Exchange". International Finance. 22 (1), 103-117. Recuperado de https://doi.org/10.1111/infi.12137Links ]

Agnes Cheng, C.S., McNamara, R.A.Y.(2000). "The valuation accu-racy of the price-earnings and price-book benchmark valuation methods.". Review of Quantitative Finance and Accounting. . Recuperado de https://doi.org/10.1023/A:1012050524545Links ]

Akyol, A.C., Cooper, T., Meoli, M., Vismara, S.(2014). "Do regulatory chan-ges affect the underpricing of European IPOs?". Journal of Banking and Finance. . Recuperado de https://doi.org/10.1016/j.jbankfin.2014.04.020Links ]

Alhadab, M., Clacher, I., Keasey, K.(2016). " A Comparative Analysis of Real and Accrual Earnings Management around Initial Public Offerings under Different Regulatory Environments.". Journal of Business Finance and Accounting. . Recuperado de https://doi.org/10.1111/jbfa.12201Links ]

Ali, H.(2017). "Behavioral Timing, Valuation, and Postissue Performance of UK Initial Public Offerings". Journal of Behavioral Finance. 18 (2), 152-166. Recuperado de https://doi.org/10.1080/15427560.2017.1308938Links ]

Alim, K., Ramakrishnan, S.(2017). "Initial Public Offerings (IPO) Performance during Hot and Cold Issue Market in Pakistan". SSRN Electronic Journal. . Recuperado de https://doi.org/10.2139/ssrn.2912413Links ]

Amini, S., Keasey, K.(2013). "The failure of small British Initial Public Offerings on the UK Alternative Investment Market: A research note on spatial and industry effects". International Small Business Journal. 31 (6), 722-733. Recuperado de https://doi.org/10.1177/0266242612458301Links ]

Amini, S., Keasey, K., Hudson , R.(2012). "The equity funding of smaller growing companies and regional stock exchanges". International Small Business Journal. . Recuperado de https://doi.org/10.1177/0266242610382931Links ]

Arora, N., Singh, B.(2019). "Impact of Auditor and Underwriter Reputation on Underpricing of SME IPOs in India". Management and Labour Studies. . Recuperado de https://doi.org/10.1177/0258042x19829285Links ]

Badru, B.O., Ahmad-Zaluki, N.A.(2018). "Explaining IPO initial returns in Malaysia: Ex ante uncertainty vs signaling". Asian Review of Accounting. . Recuperado de https://doi.org/10.1108/ARA-11-2016-0133Links ]

Bartov, E., Mohanram, P., Seethamraju, C.(2002). "Valuation of Internet stocks - An IPO perspective.". Journal of Accounting Research. . Recuperado de https://doi.org/10.1111/1475-679X.00050Links ]

Beatty, R., Riffe, S., Thompson, R. (2000). IPO pricing with accounting infor-mation . Southern Methodist University. Recuperado de http://leeds-faculty.colorado.edu/bhagat/IPO-PricingAccounting.docLinks ]

Bouzouita, N., Gajewski, J.F., Gresse, C.(2015). "Liquidity Benefits from IPO Underpricing: Ownership Dispersion or Information Effect.". Financial Management. . Recuperado de https://doi.org/10.1111/fima.1208Links ]

Colombelli, A.(2010). "Alternative Investment Market: A Way to Promote Entrepreneurship.". Journal of Industry, Competition and Trade. 10 (3), 253-274. Recuperado de https://doi.org/10.1007/s10842-010-0079-9Links ]

Colombo, M.G., Meoli, M., Vismara, S.(2019). " Signaling in science-based IPOs: The combined effect of affiliation with prestigious universities, underwriters, and venture capitalists.". Journal of Business Venturing. . Recuperado de https://doi.org/10.1016/j.jbusvent.2018.04.009Links ]

Cooley, T., Leroy, S.(1981). "dentification and Estimation of Money Demand". American Economic Review. 71 (5), 825-844. Recuperado de http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=4507846&site=ehost-live&scope=siteLinks ]

Diro Ejara, D., Ghosh, C.(2004). "Underpricing and aftermarket performance of American depositary receipts (ADR) IPOs.". Journal of Banking and Finance. 28 (12), 3151-3186. Recuperado de https://doi.org/10.1016/j.jbankfin.2004.05.006Links ]

Doukas, J.A., Hoque, H.(2016). "Why firms favour the AIM when they can list on main market? ". Journal of International Money and Finance. . Recuperado de https://doi.org/10.1016/j.jimonfin.2015.10.001Links ]

Fernandez, P.(2011). "Discounted Cash Flow Valuation Methods: Examples of Perpetuities, Constant Growth and General Case.". SSRN Electronic Journal. . Recuperado de https://doi.org/10.2139/ssrn.743229Links ]

Fine, M.B., Gleason, K., Mullen, M.(2017). "Marketing spending and after-market performance of IPO firms.". Marketing Intelligence and Planning. 35 (4), 560-576. Recuperado de https://doi.org/10.1108/MIP-05-2016-0083Links ]

Gacus, R.B., Hinlo, J.H.(2018). "The Reliability of Constant Growth Dividend Discount Model (DDM) in Valuation of Philippine Common Stocks". International Journal of Economics & Management Sciences. . Recuperado de https://doi.org/10.4172/2162-6359.1000487Links ]

Haggard, K., Walkup, B.R., Xi, Y.(2015). "Short-term performance of U.S.-Bound Chinese IPOs.". Financial Review. 50 (1), 121-141. Recuperado de https://doi.org/10.1111/fire.12062Links ]

Hawaldar, I.T., Naveen Kumar, K.R., Mallikarjunappa, T.(2018). "Pricing and performance of IPOs: Evidence from Indian stock market". Cogent Economics & Finance. 6 (1), 1-20. Recuperado de https://doi.org/10.1080/23322039.2017.1420350Links ]

Kim, M., Ritter, J.R.(1999). "Valuing IPOs.". Journal of Financial Economics. . Recuperado de https://doi.org/10.1016/S0304-405X(99)00027-6Links ]

Komenkul, K., Kiranand, S.(2017). "Aftermarket Performance of Health Care and Biopharmaceutical IPOs: Evidence From ASEAN Countries". Inquiry: a Journal of Medical Care Organization, Provision and Financing. 54 . Recuperado de https://doi.org/10.1177/0046958017727105Links ]

Kumar, R. (sin fecha). Discounted cash flow valuation models . En Valuation. Recuperado de https://doi.org/10.1016/b978-0-12-802303-7.00006-1Links ]

Leamer, E.(1983). "Let ’ s Take the Con out of Econometrics.". American Economic Review. 73 (1), 31-43. Recuperado de https://doi.org/10.2307/1803924Links ]

Leamer, E. E. (1985). "Sensitivity analyses would help". American Economic Review. . Recuperado de https://doi.org/10.1126/science.151.3712.867-aLinks ]

Levine, R., Renelt, D.(1992). "A sensitivity analysis of cross-country growth regressions". American Economic Review. 82 (4), 942-963. Recuperado de https://doi.org/10.2307/2117352Links ]

Mantell, E.H.(2016). "A theory of underwriters risk management in a firm-commitment initial public offering". Review of Quantitative Finance and Accounting. 46 (1), 179-193. Recuperado de https://doi.org/10.1007/s11156-014-0466-0Links ]

Maronna, R., Morgenthaler, S.(1986). " Robust regression through robust covariances". Communications in Statistics - Theory and Methods. 15 (4), 1347-1365. Recuperado de https://doi.org/10.1080/03610928608829187Links ]

McGuinness, P.B.(2016). "An empirical assessment of initial return volatility in newly listed stocks.". Applied Economics Letters. 23 (11), 804-811. Recuperado de https://doi.org/10.1080/13504851.2015.1109035Links ]

Migliorati, K., Vismara, S.(2014). " Ranking underwriters of European IPOs.". European Financial Management. 20 (5), 891-925. Recuperado de https://doi.org/10.1111/eufm.12049Links ]

Acedo-Ramírez, M., Ruiz-Cabestre, F.(2016). "IPO characteristics and underprincing in the Alternative Investment Market". Economics Letters. 24 (7), 1-5. Recuperado de https://doi.org/10.1080/13504851.2016.1205713Links ]

Moosa, I.A., Cardak, B.(2006). " The determinants of foreign direct investment: An extreme bounds analysis.". Journal of Multinational Financial Management,. 16 (2), 199-211. Recuperado de https://doi.org/10.1016/j.mulfin.2005.07.002Links ]

Mudambi, R., Mudambi, S.M., Khurshed, A., Goergen, M.(2012). "Multinationality and the performance of IPOs.". Applied Financial Economics. 22 (10), 763-776. Recuperado de https://doi.org/10.1080/09603107.2011.626396Links ]

Mumtaz, M.Z., Smith, Z.A., Ahmed, A.M.(2016). "An examination of short-run performance of IPOs using Extreme Bounds Analysis". Estudios de Economía. 43 (1), 71-95. [ Links ]

Mumtaz, M.Z., Smith, Z.A., Ahmed, A.(2016). "The Aftermarket Performance of Initial Public Offerings in Pakistan.". The Lahore Journal of Economics. 21 (1), 23-68. [ Links ]

Naifar, N.(2011). " Explaining IPOs underpricing in the Tunisian market". Journal of Emerging Market Finance. 10 (3), 311-336. Recuperado de https://doi.org/10.1177/097265271101000303Links ]

Obrimah, O.A.(2018). "A New Test of the Signaling Theory of IPO Underpricing". SSRN Electronic Journal. . Recuperado de https://doi.org/10.2139/ssrn.2896777Links ]

Pukthuanthong-Le, K. (2008). IPO Valuation. . En Handbook of Finance. (375-382). Recuperado de https://doi.org/10.1002/9780470404324.hof003034Links ]

Rasheed, A., Khalid Sohail, M., Din, S-U., Ijaz, M.(2018). "How Do Investment Banks Price Initial Public Offerings? An Empirical Analysis of Emerging Market.". International Journal of Financial Studies.. . Recuperado de https://doi.org/10.3390/ijfs6030077Links ]

Rathnayake, D., Louembé, P., Kassi, D.F., Sun, G., Ning, D.(2019). "Are IPOs underpriced or overpriced? Evidence from an emerging market". Research in International Business and Finance. . Recuperado de https://doi.org/10.1016/j.ribaf.2019.04.013Links ]

Reilly, F.K., Hatfield, .(1969). "Investor Experience with New Stock Issues". Financial Analysts Journal. 25 (5), 73-80. Recuperado de https://doi.org/10.2469/faj.v25.n5.73Links ]

Reutzel, C.R., Belsito, C.A.(2015). "Female directors and IPO underpricing in the US". International Journal of Gender and Entrepreneurship. 7 (1), 27-44. Recuperado de https://doi.org/10.1108/IJGE-09-2013-0059Links ]

Ritter, J.R.(1991). "The Long-Run Performance of initial Public Offerings.". The Journal of Finance. 46 (1), 3-27. Recuperado de https://doi.org/10.1111/j.1540-6261.1991.tb03743.xLinks ]

Rock, K.(1986). "Why new issues are underpriced". Journal of Financial Economics. 15 (1-2), 187-212. Recuperado de https://doi.org/10.1016/0304-405X(86)90054-1Links ]

Sahoo, S., Rajib, P.(2010). "After market pricing performance of initial public offerings (IPOs): Indian IPO market 2002-2006.". Vikalpa. 35 (4), 27-43. Recuperado de https://doi.org/10.1177/0256090920100403Links ]

Santosa, F., Symes, W.(1986). "Linear Inversion of Band-Limited Reflection Seismograms". SIAM Journal on Scientific and Statistical Computing. . Recuperado de https://doi.org/10.1137/0907087Links ]

Shapiro, E., Mackmin, D., Sams, G. (2019). Discounted cash flow . En Modern Methods of Valuation. Recuperado de https://doi.org/10.1201/9781315145419-11Links ]

Sim, T., Wright, R.H., (2017). Stock valuation using the dividend discount model: An internal rate of return approach. Research in Finance . Recuperado de https://doi.org/10.1108/S0196-382120170000033002Links ]

Tan, Q., Dimovski, W., Fang, V.(2015). "The Underpricing of Infrastructure IPOs: Evidence from China.". Review of Pacific Basin Financial Markets and Policies. 18 (4), 1550025. Recuperado de https://doi.org/10.1142/S0219091515500253Links ]

Tibshirani, R.(1996). "Regression Shrinkage and Selection Via the Lasso". Journal of the Royal Statistical Society: Series B (Methodological).. . Recuperado de https://doi.org/10.1111/j.2517-6161.1996.tb02080.xLinks ]

Wahid, A., Khan, S.A., Mumtaz, M.Z.(2019). "Pricing Performance of Cross-listed and Local IPOs : Evidence from Alternative Investment Market". Business & Economic Review. 11 (3), 1-28. [ Links ]

Wahid, A., Mumtaz, M.Z., Mantell, E.H.(2019). "Analyzing the Spillover Effects from Parental Markets to Cross-listed IPOs on Mean returns and Price Volatility". South Asian Journal of Management Sciences. . Recuperado de https://doi.org/10.21621/sajms.2019132.04Links ]

Wahid, A., Mumtaz, M.Z., Mantell, E.H.(2020). "Short-run Pricing Performance of Local and Dual Class IPOs in Alternative Investment Market. Romanian". Journal of Economic Forecasting. 23 (1), 57-74. [ Links ]

Zheng, S.X.(2007). "Are IPOs really overpriced? ". Journal of Empirical Finance. 14 (3), 287-309. Recuperado de https://doi.org/10.1016/j.jempfin.2006.06.001Links ]

Received: June 0, 2020; Accepted: August 0, 2020

Creative Commons License Este es un artículo publicado en acceso abierto bajo una licencia Creative Commons