The Post-Issue Operating Performance of IPO Firms

Bharat A Jain and Omesh Kini

Journal of Finance, 1994, vol. 49, issue 5, 1699-1726

Abstract: This article investigates the change in operating performance of firms as they make the transition from private to public ownership. A significant decline in operating performance subsequent to the initial public offering (IPO) is found. Additionally, there is a significant positive relation between post-IPO operating performance and equity retention by the original entrepreneurs but no relation between post-IPO operating performance and the level of initial underpricing. Postissue declines in the market-to-book ratio, price/earnings ratio, and earnings per share are also documented. Copyright 1994 by American Finance Association.

Date: 1994
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