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- Title
Assets in Place, Growth Opportunities, and IPO Returns.
- Authors
Chung, Kee H.; Mingsheng Li; Yu, Linda
- Abstract
We consider a simple model positing that initial public offering price is equal to the present value of an entity's assets in place and growth opportunities. The model predicts that initial return is positively related to both the size and risk of growth opportunities. Consistent with this prediction, we find initial return to be positively related to both the fraction of the offer price that is accounted for by the present value of growth opportunities and various proxies of issue uncertainty. We also find that IPO investors equate one dollar of growth opportunities to approximately three quarters of tangible assets.
- Subjects
GOING public (Securities); ASSETS (Accounting); FINANCE; RATE of return; BUSINESS
- Publication
Financial Management (Wiley-Blackwell), 2005, Vol 34, Issue 3, p65
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/j.1755-053X.2005.tb00110.x