IPO Valuation Based On Comparable Firm Approach

IPO price behavior including two phases:the first stage is from the IPO valuation to the first day,the second stage covers a long period of time from the first day to post-listing.There are three anomalies exist in the whole process,two of which will study in this paper,IPO underpricing and IPO long-run performance,which is the main study of IPO behavior research.However,it remains a“puzzle”.The most basic and important research direction of IPO price behavior research is IPO valuation,the reason is that IPO valuation not only influence the first-day return,but also influence the IPO long-run performance,which is the starting point of the whole IPO price behavior research.The sample of this paper is 827?after screening?IPO companies listed in China's small medium enterprise?SME?board and ChiNext board from 2006.9 to 2016.12.We introduce the“P/S“,“P/E”,“P/EBITDA”and“P/IC”to the comparable companies multiplier model to study the IPO valuation,the empirical results show that the P/V ratio is less than 1,the IPO valuation is significantly underpriced compared to its comparable companies.The P/V_S,P/V_E,P/V_EBITDA and P/V_IC are be used as explanatory variables to explain IPO first-day return.We use a single factor regression to test the relationship between IPO valuation and IPO first-day return.The results show that the IPO excess first-day return is negatively correlated with P/V,therefore,the IPO excess first-day return is partly due to the low price in the primary market,In addition,we classified the influence factors of IPO underpricing in accordance with the“Asymmetric Information Theory“and the“Behavioral Finance”,and we use three multiple regression models to analyze IPO underpricing,the results show that the IPO excess first-day returns mainly derive from the investor sentiment from the secondary market.Based on different market benchmark and different average methods,we use the BHAR model to test the IPO long-run performance,the results show that the IPO long-run performance is different by using different market benchmarks and different average methods,but the overall trend is that the IPO long-run performance is better than its comparable companies,which is different from the traditional conclusion.