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

Michael FIRTH

    Research output: Journal PublicationsJournal Article (refereed)

    40 Citations (Scopus)

    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.
    Original languageEnglish
    Pages (from-to)63-85
    Number of pages23
    JournalPacific Basin Finance Journal
    Volume5
    Issue number1
    DOIs
    Publication statusPublished - 1 Feb 1997

    Fingerprint

    New Zealand
    Stock market performance
    New issues
    Profit
    Market valuation
    Long-run performance
    Forecast accuracy
    Cash flow
    Benchmark
    Stock exchange
    Stock market returns
    Underperformance
    Abnormal returns

    Keywords

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

    Cite this

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    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.",
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    An analysis of the stock market performance of new issues in New Zealand. / FIRTH, Michael.

    In: Pacific Basin Finance Journal, Vol. 5, No. 1, 01.02.1997, p. 63-85.

    Research output: Journal PublicationsJournal Article (refereed)

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