Maher Kooli

The Survival Profile of U.S. IPO Issuers: 1985–2005

This article examines the survival profile of U.S. Initial Public Offerings (IPOs) for the 1985-2005 period. More specifically, the authors develop Multinomial Logit models based on the information contained in the prospectus and attempt to determine what factors influence the post-issue transition of the IPO firms into survivors, non-survivors or targets. The main findings of the article are that larger IPOs experience a lower probability of delisting, and higher underpricing increases the probability of failure or becoming a target. Further, the presence of venture capitalists and a prestigious underwriter at the IPO stage seems to influence the post-IPO transition state. They also estimate an accelerated-failure-time model as a robustness test and confirm their previous results. They also find that the survival time is negatively affected if the IPO is in the internet sector.

A New Examination of the Private Company Discount: The Acquisition Approach

Determining the appropriate discount for lack of marketability (DLM) is one of the most challenging questions in valuing private firms, and one that has only recently begun to be deeply explored. In this study, using several multiples with a methodology robust to the criticisms addressed to the acquisition approach, we find that privately-acquired firms are indeed discounted. The median DLM observed, however, varies with the multiple considered. For example, we find that the estimated median private company discount is 34% with the earnings multiple, whereas it is 20% for the cash-flow multiple. Furthermore, we find that the estimated DLM varies across firms and some industries, and tends to be smaller for large and growth private companies, but is more sensitive to growth than to size.

Dividends Versus Share Repurchases Evidence from Canada: 1985–2003

This paper provides out-of-sample evidence on the payout policy in Canada during the 1985–2003 period. First, we show that the proportion of nonfinancial firms paying dividends has decreased, while the proportion initiating repurchase programs has increased. We also show that Canadian firms paying dividends and repurchasing shares are extremely concentrated. Second, we focus on the factors that could affect the choice between repurchases and dividends. We find that dividends and repurchases are used by different types of firms. While we do not confirm the financial flexibility hypothesis, our results are consistent with the substitution hypothesis after controlling for selection bias and endogeneity.

Is There Any Life After Going Public? Evidence from the Canadian Market

This article examines the survival profile of Canadian initial public offerings (IPOs). More specifically, the authors develop multinomial logit models based on the information contained in the prospectus and attempt to determine what factors influence the post-issue transition of the IPO firms into survivors, non-survivors, or targets. They find that larger IPOs experience a lower probability of delisting, and higher underpricing implies a lower probability of failure or becoming a target. Further, the presence of venture capitalists at the IPO stage seems to influence the post-IPO transition state. The authors also estimate an accelerated-failure-time model as a robustness test and find that the survival time for IPOs increases with the level of underpricing and decreases during hot issue periods. This latter result suggests that leaving money on the table is not a bad thing as generally perceived and has some beneficial outcomes such as enhancing the survivability of the firm.

Does Earnings Management Explain the Performance of Canadian Private Placements of Equity

Abstract Using a sample of 434 Canadian private placements of equity (PPEs) that occurred from 1996 to 2005, we first examine the long-run performance following PPEs, and secondly, we analyze the earnings management hypothesis. We find that Canadian PPEs do underperform on a calendar-time basis as well as on event-time basis. We also find that most aggressive earnings management firms issue larger offerings than most conservative ones but post the worst long term performance. The result for the most aggressive quartile is consistent with the over-optimism hypothesis. However, we find that private placements issuers unlike public issuers are less inclined to manage earnings around the time of the offering.

From IPO to M&A: Further Evidence

This study investigates the determinants of mergers and acquisitions (M&A) for firms in the five years following their initial public offerings (IPOs). Specifically, the authors focus on the role of venture capital (VC) and the effect of asymmetric information on the probability of post-IPO M&A. The results indicate that VC reputation positively influences the likelihood that an IPO firm will engage in acquisition. They also find that a high extent of information asymmetry faced by both the acquirer and the target affects the choice of payment in a post-IPO M&A. Furthermore, they find that IPO firms with higher underpricing and proceeds, larger insider ownership dilution, and backed with reputable venture capitalists are more likely to be frequent acquirers after the IPO. Overall, the authors’ new findings confirm that an IPO represents an opportunity for new issuers to become single and even frequent acquirers.

Single versus multiple banking: lessons from initial public offerings

A vast research in banking addresses the question of the costs and benefits of multiple bank relationships versus a single bank relationship. Although no clear-cutting conclusion is reached, several contributions suggest that multiple bank relationships might lead to a sub-optimal level of monitoring, compared to a single bank relationship, as a result of free riding and coordination problems. We take a novel approach to tackle this research question, by looking at the role, if any, played by the number of lending relationships in initial public offerings (IPOs). We look at the short-term performances of IPOs as measured by underpricing and find that firms that go public with multiple bank relationships exhibit more underpricing than those that go public with a single bank relationship. This finding is independent of the number of bank relationships and/or whether any of the lending banks also acts as underwriter in the offering. We interpret our results as suggesting that the market attributes a weaker certification role to multiple bank relationships because of their less effective monitoring of IPO firms.

Rankings of the Largest 25 Hedge Funds during the2009–2013 Period

We use the live Barclay Hedge database and examine 25 of the largest onshore and offshore hedge funds during the 2009-2013 period. Our results show that the majority of our considered large hedge funds do a poor job of outperforming the S&P 500 Index over the 5-year after the crisis and a good job of outperforming the HFR hedge fund index. However, large funds have better risk control measures than the S&P 500 over the 5-year period as well as better risk-adjusted returns. The performance persistence tests reveal that during our sample period, winners remain winners.

Do “Hot Hands” Exist in Funds of Hedge Funds?

One of the most important news events for the U.S. stock markets is certainly the election of the President. This study seeks to determine whether market reactions to elections are a valuable source of information for investors. Using data for the years 1896–2001, a momentum effect appears during the remainder of the election year, a slight reversal effect appears across the president’s term, and a strong reversal effect appears during the President’s second year in office. The difference in campaign information during the election and actual subsequent economic policy implementations may explain why the market’s vote does count.

Does Venture Capitalists Reputation Improve the Survival Profile of IPO Firms

This paper examines the effect of Venture Capital (VC) reputation on the survival profile of U.S. Initial Public Offerings (IPOs) firms for the 1985-2005 period. To do so, we construct a VC quality index and develop multinomial logit models based on the information contained in the prospectus. The main findings of the paper are that VC reputation does indeed improve the IPO survival profile. While we find that leaving money on the table is a bad survival signal, we confirm that having a prestigious underwriter to market the issue is a good survival signal. Further, we find that Sarbanes-Oxley Act adoption has a positive effect on IPO survival. We also confirm our result after controlling for self selection bias and estimating an accelerated-failure-time model as robustness tests.