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Title: Earnings forecast accuracy,allocation of share, initial performance and flipping activities in Greek IPOs
Author: Gounopoulos, Dimitrios
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 2007
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This thesis investigates the accuracy of earnings forecasts in the prospectuses of initial public offerings (IPOs) and the allocation of shares via bookbuilding and fixed offer price mechanisms. It proceeds with the analysis on the level of underpricing in Greek market and it concludes with evidence in the flipping activity by investors. First, we compare the earnings forecasts made by management in the I PO prospectuses during the pre-listing period with the actual earnings, announced in the annual report of the first year after listing. The mandatory status in Greece for new firms to furnish management earnings forecasts in their prospectuses provides a rare test case. We find that, on average managers understate earnings and provide pessimistic forecasts. Our results suggest high error in management earnings forecasts. Second, the study examines the bids and allocation in IPOs. It carries on with a comparison between fixed offer mechanism and bookbuilding method. The results show that large bids receive better pro rata allocations at the same time that small bids do not receive any shares. Based on allocation decisions, large investors makc substantial profit in underpriced issues, but they lose on overpriced securities. Among the book building sample and in contrast to the evidence on the US, Greek IPOs are not priced outside the indicative price range while many are priced in the upper end of the filing range. Third, this thesis examines the issue of short-term performance. By international standards, underpricing is high in Greece. Price cap in specific periods of this study proves to be a constraint for many issues to reach their fair and equilibrium initial price. The findings document significant differences in the level of first day returns between the various sub-periods. To shed more light on the underpricing phenomenon a model using independent variables evaluate the performance of IPOs. Finally we determine the phenomenon of flipping in the immediate aftermarket. We test flipping of shares allocated to institutional and retail investors. We do find that shares are not properly allocated, with respect to buy and hold oriented investors. Accordingly we infer that flipping behavior is mainly concentrated in small and listed in the secondary market IPOs. March
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available