The impact of regulatory reforms on the earnings forecasting behaviour of IPO firms

Purpose – The purpose of this paper is to jointly assess the impact of regulatory reform for corporate fundraising in Australia (CLERP Act 1999) and the relaxation of ASX admission rules in 1999, on the accuracy of management earnings forecasts in initial public offer (IPO) prospectuses. The relaxation of ASX listing rules permitted a new category of new economy firms (commitments test entities (CTEs))to list without a prior history of profitability, while the CLERP Act (introduced in 2000) was accompanied by tighter disclosure obligations and stronger enforcement action by the corporate regulator (ASIC). Design/methodology/approach – All IPO earnings forecasts in prospectuses lodged between 1998 and 2003 are examined to assess the pre- and post-CLERP Act impact. Based on active ASIC enforcement action in the post-reform period, IPO firms are hypothesised to provide more accurate forecasts, particularly CTE firms, which are less likely to have a reasonable basis for forecasting. Research models are developed to empirically test the impact of the reforms on CTE and non-CTE IPO firms. Findings – The new regulatory environment has had a positive impact on management forecasting behaviour. In the post-CLERP Act period, the accuracy of prospectus forecasts and their revisions significantly improved and, as expected, the results are primarily driven by CTE firms. However, the majority of prospectus forecasts continue to be materially inaccurate. Originality/value – The results highlight the need to control for both the changing nature of listed firms and the level of enforcement action when examining responses to regulatory changes to corporate fundraising activities.

Ownership, corporate governance and IPO post-listing liquidity

This thesis investigates how ownership structure and corporate governance relate to the post-listing liquidity of IPO firms. Using a sample of 1,049 Chinese IPOs from 2001 to 2010, the results show firms with a broader shareholder base and higher ownership concentration have greater post-listing liquidity. So do firms with higher state ownership and lower institution ownership. Corporate governance is also important; post-listing liquidity is higher for firms with CEO duality, a larger and more independent board, and more frequent board meetings. The 2005 Split Share Structure Reform, which increased the proportion of tradable shares, has a positive impact on liquidity.

IPO failures around the world

This thesis consists of two essays on IPO failures around the world. IPO failures are defined as IPO withdrawals (Essay 1) or delistings of recent IPOs for negative reasons (Essay 2). A common theme that runs through the two essays is the importance of institutional and cultural characteristics in explaining cross-country differences in IPO failures.