Keywords

Initial Public Offering (IPO), long-run stock performance, Merger and Acquisition (M&A)

Abstract

We analyze a sample of 4,795 IPOs that went public between 1985 and 2003 to determine the impact of acquisition activity on long-run stock performance. After controlling for relevant factors, we find that IPOs that acquire within a year of going public significantly underperform for three-year holding periods following the first year, whereas non-acquiring IPOs do not significantly underperform over this time frame. In addition, firms that wait for more than a year after the IPO to become an acquirer do not underperform. Our event- and calendar-time results suggest that the acquisition activity of newly public firms plays a previously unrecognized role in the long-run underperformance of IPOs.

Original Publication Citation

The Desire to Acquire and IPO Long-Run Underperformance, with Rob Couch and Ninon Sutton, Journal of Financial and Quantitative Analysis, Vol. 47, Issue 3, 2012, 493-510.

Document Type

Peer-Reviewed Article

Publication Date

2010

Publisher

Journal of Financial and Quantitative Analysis

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Full Professor

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