AN EMPIRICAL TEST OF AN IPO PERFORMANCE PREDICTION MODEL

An earlier study of 563 firms which issued IPOs during 1997 identified and estimated a three-stage algorithm in which basic accounting variables and indices available at the time of the IPO were found to predict mean annual wealth appreciation from buy-and-hold stock ownership for the ensuing three years. Firm size predicted membership in the middle sixth and seventh deciles; sales, receivables turnover, and retained earnings per assets predicted the top quintile; current debt and selling costs predicted the lowest quintile. Since February 2001 market trends have been generally negative. The current paper confirms the earlier model despite negative currents.