Valuing Ipo
- Submitted by: michaiel
- Views: 1121
- Category: English: Authors
- Date Submitted: 12/02/2010 04:34 AM
- Pages: 39
- Report this Essay
Valuing IPOs
by Moonchul Kim Department of Accounting KyungHee University #1 Hoegie-Dong Dongdaemun-Ku Seoul 130-701 Korea kimc@nms.kyunghee.ac.kr and Jay R. Ritter Department of Finance School of Business Administration University of Florida Gainesville FL 32611-7168 ritter@dale.cba.ufl.edu (352) 846-2837 voice (352) 392-0301 fax Journal of Financial Economics (Vol. 53, No. 3) September1999, pp. 409-437. Abstract The use of accounting information in conjunction with comparable firm multiples is widely recommended for valuing initial public offerings (IPOs). We find that the priceearnings (P/E), market-to-book, and price-to-sales multiples of comparable firms have only modest predictive ability without further adjustments. This is largely due to the wide variation of these ratios for young firms within an industry. P/E multiples using forecasted earnings result in much more accurate valuations than multiples using trailing earnings. JEL classification: G24 Keywords: Initial public offerings; Valuation; Comparable firms This paper is based on Moonchul Kim's University of Illinois Ph.D. dissertation. We would like to thank seminar participants at Boston, Emory, Georgetown, Humboldt (Berlin), and Vanderbilt Universities, the Universities of Miami and Texas, the Stockholm School of Economics, the Chinese University of Hong Kong, the New York Federal Reserve, the NBER, the 1996 Harvard Financial Decisions and Control Workshop, the 1997 Tuck Underwriting Conference, and Alan Eberhart, Chris Barry, Harry DeAngelo, Linda DeAngelo, Craig Dunbar, John Fellingham, Kathleen Weiss Hanley, Chris James, Linda Killian, Inmoo Lee, Joshua Lerner, Tim Loughran, Michael Ryngaert, Bill Schwert, Theodore Sougiannis, David Ziebart, and an anonymous referee for numerous comments. We would like to thank Sophia Chiang, Linda Killian, and Joshua Lerner for generously providing data. The assistance of Hsuan-Chi Chen and Inmoo Lee is particularly appreciated.
1
Valuing IPOs
[Bill]...
by Moonchul Kim Department of Accounting KyungHee University #1 Hoegie-Dong Dongdaemun-Ku Seoul 130-701 Korea kimc@nms.kyunghee.ac.kr and Jay R. Ritter Department of Finance School of Business Administration University of Florida Gainesville FL 32611-7168 ritter@dale.cba.ufl.edu (352) 846-2837 voice (352) 392-0301 fax Journal of Financial Economics (Vol. 53, No. 3) September1999, pp. 409-437. Abstract The use of accounting information in conjunction with comparable firm multiples is widely recommended for valuing initial public offerings (IPOs). We find that the priceearnings (P/E), market-to-book, and price-to-sales multiples of comparable firms have only modest predictive ability without further adjustments. This is largely due to the wide variation of these ratios for young firms within an industry. P/E multiples using forecasted earnings result in much more accurate valuations than multiples using trailing earnings. JEL classification: G24 Keywords: Initial public offerings; Valuation; Comparable firms This paper is based on Moonchul Kim's University of Illinois Ph.D. dissertation. We would like to thank seminar participants at Boston, Emory, Georgetown, Humboldt (Berlin), and Vanderbilt Universities, the Universities of Miami and Texas, the Stockholm School of Economics, the Chinese University of Hong Kong, the New York Federal Reserve, the NBER, the 1996 Harvard Financial Decisions and Control Workshop, the 1997 Tuck Underwriting Conference, and Alan Eberhart, Chris Barry, Harry DeAngelo, Linda DeAngelo, Craig Dunbar, John Fellingham, Kathleen Weiss Hanley, Chris James, Linda Killian, Inmoo Lee, Joshua Lerner, Tim Loughran, Michael Ryngaert, Bill Schwert, Theodore Sougiannis, David Ziebart, and an anonymous referee for numerous comments. We would like to thank Sophia Chiang, Linda Killian, and Joshua Lerner for generously providing data. The assistance of Hsuan-Chi Chen and Inmoo Lee is particularly appreciated.
1
Valuing IPOs
[Bill]...