The Sarbanes-Oxley (SOX) Act of July 2002 was created to address the financial malfeasance revealed during the investigations of several large firms by the Securities and Exchange Commission (SEC). The Act required public companies traded on U.S. exchanges to provide increased transparency in financial statements. Key portions of the legislation required firms to create internal financial controls and placed personal accountability with top executives. SOX mandated and standardized a greater degree of self-regulation. In the years following SOX, firms experienced significantly higher compliance costs, but they also benefited from the reduction of statement errors and fraud, increased accuracy in reporting, and greater investor confidence. After the Sarbanes-Oxley (SOX) Act of 2002, anecdotal evidence suggested that SOX impeded small, research intensive firms. We looked at research intensive firms going public before and after SOX to determine if there was a change in volume and quality of research intensive firms post-SOX. We found that firms that went public after SOX were fewer and had lower patenting activity. In the case of small and medium size firms, the cost of SOX compliance is likely to divert funds from research investments. We speculate that highly research intensive firms are more likely post-SOX to divert their IPO to non-U.S. exchanges, delay going public, or dismiss the idea of going public, as proposed in a “3Ds” model. The 2002 SOX US Congressional Act levied millions of dollars in new compliance costs on each foreign or domestic firm that went public on U.S. exchanges. Funding for regulatory expenditures must come from somewhere. We proposed that one likely candidate was research budgets, as research efforts have a more distant, less immediately visible, long term effect on firm performance. We suggested that large firms more easily absorbed the additional costs of SOX with a reduced effect on research and development budgets, while small firms were less able to maintain research budgets after SOX. In the aftermath of SOX, research spending did go down, most visibly in Biotech and Electronics. As the total number of IPO firms decreased dramatically after SOX, these two research intensive industries, plus Computer Software, were the only industries with a large enough sample size to evaluate. We saw that research intensive firms diminished dramatically, along with many non-research intensive firms, from IPO events after SOX. Where we had sufficient sample size, in computer software, biotechnology, electronics, and “other”, we noted that research-intensive firms generally resisted the temptation to raid research budgets, finding funding for compliance elsewhere within the company or from the additional cash flow at time of IPO. Where firms did appear to greatly reduce research budgets was in the non-research intensive industries, where research budgets might be more of a discretionary expense. Firm size was not a factor in whether research intensive firms could better absorb the costs of SOX, although smaller firms tended to spend proportionally more on research in an effort to grow faster. After the enactment of SOX, we observed an indication that the markets valued research intensity even more than prior to SOX, perhaps understanding the vulnerability of research budgets being diverted to compliance costs. Overall, the data suggested that the effect of SOX was underestimated in this study, as the firms that were deterred from going public on U.S. exchanges were not in the sample evaluated. We only analyzed those firms prepared to accept the higher costs of SOX. The data set consisted of survivors, selected firms still willing to pay for SOX compliance as well as for research programs. / Business Administration/Strategic Management

Combining agency theory and the resource-dependence perspective as well as signalling theory, this thesis examines the role venture capitalists (VCs) and founders play with respect to both structural board characteristics and board capital in terms of experience and prestige and whether these are linked to performance. It claims that VCs and founders shape the governance system of the firms going public and are influential in the professionalisation of the ventures especially in terms of human and social capital of its board of directors. It also argues that the board of directors represents a signal of firm quality in the initial public offering (IPO) market and should thus be linked to performance. Similarly, according to the venture capital certification hypothesis, being funded by VCs signals a firm's quality and potential. In order to assess these claims, this thesis employs a unique sample of matched venturecapital- backed and non-venture-capital-backed entrepreneurial IPOs that floated either on the London Stock Exchange's Official List or the Alternative Investment Market (AIM). Extending previous research this thesis employs more fine-grained measures and introduces new conceptually relevant variables in the analysis. The findings indicate that VCs and founders are influential in shaping corporate governance of IPO-stage ventures both from an agency and resource-provision perspective. Findings from the examination of governance and professionalisation characteristics with respect to IPO short-run performance (underpricing) indicate that it may the involvement of prestigious auditors that signal firm quality while a founder bias discount seems to exist. While evidence is found that VC involvement (and to a lesser extent director/board characteristics) is related to post-IPO market performance, this seems to depend on the time period following the IPO examined, whereas auditor prestige shows a positive association in all of these time periods.

The listing of firms on stock exchanges does not only provide these firms with the opportunity to raise long-term equity capital, it also allows for investors to participate in the primary and secondary equity markets. Traditionally executed through Initial Public Offerings (IPOs), listings were previously reserved for large firms due to the requirements and costs involved. In response, the Johannesburg Stock Exchange (JSE) introduced the JSE Alternative Exchange (AltX) in 2003 as a parallel exchange market in order to also provide South African small and medium sized entities with an opportunity to access equity capital. This also allowed for investors to invest in small high-growth companies with the expectation of higher returns. The aim of this research was to analyse the IPO performances of JSE AltX listings in order to establish the returns achieved by the initial IPO and the subsequent aftermarket participants. This research analysed the initial IPO returns attributable to the initial investors and the 1, 2 and 3 year aftermarket returns attributable to the aftermarket participants. Although various studies have been concluded on the investor returns for IPOs listing on the JSE, this report focused specifically on the AltX which has not been as extensively studied. IPOs listing on the JSE AltX from April 2006 to December 2011 were analysed. It was found that during this period, the average initial market-adjusted return offered to the initial invertors was 21 per cent after the first day of trade. The average 1, 2 and 3 year aftermarket market-adjusted returns were -0.08, -0.33 and 3.36 per cent respectively. An analysis of the combined aftermarket market-adjusted returns for the same 1, 2 and 3 year post IPO periods yielded returns of 25.17, 20.03 and 25.67 per cent respectively. From the conducted study, the results indicate that there is existence of average positive abnormal initial returns on the JSE AtlX, and returns underperformance for the two years following that. The aftermarket returns are then positive 3 years post IPO date. Combined returns were found to be abnormal and positive throughout the 1,2 and 3 year periods post IPO.

Thesis advisor: Thomas J. Chemmanur / My dissertation is comprised of three chapters. In the first chapter, I analyze the effect of top management changes on subsequent corporate innovation in venture capital-backed private firms using a hand-collected dataset. I find that top management changes are associated with significantly more and higher quality corporate innovation (as measured by their patenting activity). I show that top management changes are likely to be venture-driven and that the effect of top management changes on corporate innovation is stronger for firms where venture capitalists have greater power. An instrumental variable analysis using an exogenous shock to the supply of outside managers available for hire implies a causal effect of top management changes on corporate innovation. I establish that one mechanism through which top management changes enhance corporate innovation is through new management teams hiring more inventors for a given investment size. I also show that both top management changes and corporate innovation have a positive impact on firms' successful exits. In the second chapter, co-authored with Thomas Chemmanur and Karthik Krishnan, we hypothesize that VC-backing garners greater “investor attention” (Merton (1987)) for IPOs, allowing IPO underwriters to perform two information-related roles more efficiently during the book-building and road-show process: information dissemination, where the lead underwriter disseminates noisy information about various aspects of the IPO firm to institutional investors; and information extraction, where the lead underwriter extracts information useful in pricing the IPO firm equity from institutional investors. Using pre-IPO media coverage as a proxy, we show empirically that VC-backed firm IPOs indeed obtain greater investor attention, causally yielding them more favorable IPO characteristics such as higher IPO and secondary market valuations. In the third chapter, co-authored with Thomas Chemmanur, Lei Kong, and Karthik Krishnan, using panel data on top management characteristics and a management quality factor constructed using common factor analysis on individual management quality proxies, we analyze the relation between the human capital or “quality” of firm management and its innovation inputs and outputs. We control for the endogenous matching between firm and management quality using a plausibly exogenous shock to the supply of new managers as an instrument, thereby finding a causal relationship between management quality and innovation activities. We show that higher management quality firms achieve greater innovation output by hiring more and higher quality inventors. / Thesis (PhD) — Boston College, 2017. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.

This thesis is an empirical event study that examines the short-run performance of initial public offerings (IPO), known as underpricing and initial return. I argue that literature which only presents equal weights could potentially give the reader a skewed understanding of the width of the concept. By using a new data set of Nordic IPOs during the period 2009-2018, I provide estimates using equal as well as market capitalization weights consistently to give a more nuanced and fair picture. The equally weighted first-day initial return is estimated to be 4.96% and the value weighted first-day initial return is estimated to be 5.32% during the examined time period. Further, the initial return is examined in relation to firm characteristics as well as quarterly index returns and issuance volume. No statistically significant characteristics that can identify additional levels of underpricing was found. Quarterly average initial returns and quarterly index returns are independent of each other. In line with previous literature the positive relationship of issuance volume and initial return is valid on a quarterly level, indicating that firms tend to go public in times of positive and higher initial returns to a greater extent.

ABSTRACT In the first essay titled "The Value of Strategic Alliances in Acquisitions and IPOs," I investigate how firms' strategic alliance experience affects their valuations as acquisition targets or in IPOs. I propose that strategic alliance experience serves as a valuable signaling device for target and IPO firms, particularly those with more intangible assets and greater opacity. The results show that takeover targets with alliance experience receive higher premiums than those without such experience. More recent alliance experience as well as alliance experience in the same industry also contributes to a larger target gain. Similarly, IPO firms that have alliance experience are shown to obtain higher valuations than those without the experience. Finally, alliance experience increases the likelihood that private firms exit by going public rather than being acquired. In the second essay titled "For Better or For Worse: The Spillover Effect of Innovation Events on Alliance Partners," I examine the spillover effects of breakthrough innovations on the strategic alliance partners of the innovative firm. I find direct stock market evidence that the shareholders of strategic alliance partners significantly benefit from the spillover effects of these innovations. Multivariate analyses indicate that young and newly listed innovator firms with better growth opportunities generate bigger abnormal returns when announcing innovation events and bring larger spillover effects for their alliance partners with similar characteristics. In addition, I explore the risks associated with alliance partnerships, showing that FDA warning letters cause significant wealth losses for both the innovative firm and their alliance partners.

本研究首先以資訊差異模型描述IPOs股價橫斷面與縱斷面的比較與變化。在橫斷面比較上，本研究利用貝氏定理，令投資人在擬掛牌公司釋放出歷史資訊後，首先修正其事前信念以獲得事後信念，最後再以事後有限的資訊數量推估下一期的報酬率，然因歷史資訊之數量與品質不等，下一期預測報酬率之β係數亦顯然不同。資訊結構較佳者，估計風險較低，β係數較小；資訊結構較差者，估計風險較高，β係數較大。因此，為吸引投資人對資訊結構較差之IPOs的興趣，在必要報酬率要求較高的前提下，資訊結構較差之IPOs的承銷價格必須低訂，以製造投資人可以獲利的空間。因此，在其他條件相同的情況下，資訊結構較差之IPOs其掛牌初期的股價報酬率應該優於資訊結構較佳的IPOs。 其次，在IPOs縱斷面股價行為差異之模型推導上，本研究將市場IPOs區分成資訊結構佳者與資訊結構較差者，在資訊數量與發行時間成正相關的假設下，推導出當掛牌時間t趨近時，證券間之資訊差異效果遞減，且新發行證券之β係數遞減，因而進一步推論，就所有IPOs而言，後市股價報酬率將低於估計風險相對較高的掛牌初期股價報酬率。 另外，本研究之實證共分三個層次：第一層次就IPOs橫斷面股價行為方面。本研究首先就不同發行市場的IPOs之初期股價表現進行驗證。不同發行市場對擬掛牌公司之輔導期間與體質結構有不同的要求，一般而言，集中市場之發行面較店頭市場嚴格，因此，集中市場IPOs之資訊結構理論上比店頭市場IPOs佳。實證結果發現，資訊結構較佳之集中市場IPOs，其初期投資報酬率比店頭市場IPOs差。是故，實證結果支持不同發行市場之資訊結構差異假說。繼之，根據過去文獻與個案訪談的整理，若以內部人持股比、企業規模、企業年齡、承銷商聲譽、會計師聲譽與是否轉換發行市場作為單一發行市場內資訊結構優劣分際的標準時，發現，集中市場內資訊差異效果顯著；然店頭市場內，卻只有在空頭時期上櫃之IPOs，其初期投資報酬率具有資訊差異效果。 實證之第二層次為檢定IPOs縱斷面之股價變化是否亦具有資訊差異效果。首先就不同發行市場做比較，實證結果發現，集中市場因資訊結構較佳，正式掛牌前投資人與發行公司間資訊不對稱情形較不嚴重，因此，當蜜月期過後，股價逐漸迴歸真值時，掛牌一年後股價之修正幅度較資訊結構相對不佳的店頭市場IPOs小，因此，不同發行市場間，IPOs資訊結構之縱斷面差異效果獲得支持。另外，集中市場IPOs類屬資訊結構較佳者，其後市股價下修程度遠比資訊結構差者來得少。至於店頭市場之差異效果，雖然資訊結構較佳者其股價修正幅度小於資訊結構較差者，然兩者間並未達到統計上顯著差異性，因此店頭市場縱斷面之資訊差異效果並未獲得支持。 實證之第三層次，為檢定IPOs錯估訊號來源。實證結果發現，集中市場內，由聲譽較差之承銷商輔導上市及上市前每股盈餘越少之IPOs，越容易產生價格錯估行為。而店頭市場內，越是由聲譽較差之承銷商輔導上櫃或類屬傳統產業類股之IPOs，越容易產生價格錯估行為。 / The objective of this study is twofold. First, the paper develops a model to examine cross-sectionally and dynamically the effects of differential information on various initial public offerings (IPOs). Second, this paper examines the initial return and the after-market performance for IPOs, particularly the security valuation effects of structural differences in available information. There is a diversity of information among issuing firms at the time of their offering and particularly under certain trading system and certain market conditions. Through Bayesian model development, we support the effect of differential information among IPOs of structural differences. From empirical evidence, we find that during hot market conditions and under over-the-counter (OTC) trading system and for firms characterized by poor levels of available information, the market values of issuing firms are more likely to be overestimated in the immediate after-market. We also find positive overestimation of market values to be more likely for IPOs of smaller earnings per share (EPS) and those marketed by the less prestigious underwriters under Taiwan Security Exchange (TSE) trading system, and for IPOs other than hi-tech securities and those marketed by the less prestigious underwriters under OTC trading system.

This research is based on native companies and underwriters¡¦ perspectives to discuss the advantages and decision making process of listing a company¡¦s stocks in Taiwan capital market or in oversea markets. It further analyzes the strengths and weaknesses of Taiwan and Hong Kong capital markets in legal and trading aspects, when also taking the costs into consideration. By analyzing the advantages/disadvantages of each capital market and the encourage policies of both governments, it illustrates the factors that influence a company to choose a favorable market in order to maximize its value. This research compares the following issues¡G A. The IPO regulations of Taiwan and Hong Kong capital markets B. The scales of Taiwan and Hong Kong capital markets C. The costs for IPO in Taiwan and Hong Kong capital markets By referring related articles, it induces the following results¡G A. Common benefits from IPO¡GMore convenient channels for fund raise, increasing international reputation, enhancing internal control system and management, brain gain, more Merger & Acquisition opportunities, and providing shareholders flexible financial planning. B. Planning IPO in local or foreign markets, a company¡¦s consideration would be different. The differentiation is mainly from¡G 1. different goals and strategies 2. different costs and benefits 3. different requirements and qualification for going public. C. The reasons for low management fee are¡G 1. Since underwriters mainly focus on capital gain, not management fee, there is not enough motivation for them to adjust the rate of management fee. 2. numerous underwriters result fierce price competition 3. management fee is related to industry/economy growth and recession 4. Investors might doubt whether the probability of their participating in security allocations is not equal to others. Last, this research provides the conclusion and recommendations. Via comparing these two capital markets, we look for the best solution to change the inferior position of Taiwan capital market and underwriters, and at least provide useful information for our government authorities, underwriters, and companies who are interested in going public in Hong Kong.

This thesis examines underpricing in Sweden using unique data on the 185 firms going public through initial public offerings (IPOs) and listing on the Stockholm Stock Exchange between 1994-2011. The average initial return in the Swedish IPO market adjusted for index movements is 11.49% but underpricing of individual IPOs was as high as 241.04%. Further, time trends in underpricing, the level of average initial returns effect on IPO supply underpricing and differences between sectors, segments and investment banks are examined. Finally, it is argued that investors must be rewarded for taking the high risk associated with IPO investing and that the average initial return of 11.49% is a reasonable compensation for that risk.

Prior studies show the evidence of non-financial variables such as marketing affects investor¡¦s response to risky asset pricing, and indicate that the distribution of risky asset returns is asymmetric and non-nomality, implying using Ordinary Least Squares (OLS) method with the assumption of normal distributions may lead to unreliable estimates. This study tries to apply quantile regression to the analysis of the sample in order to avoid estimation bias. This study examines whether a firm¡¦s pre-IPO marketing expenditures affects its¡¦ initial public offering (IPO) underpricing in Japan and examine whether market states influence the existing relation between pre-IPO marketing expenditures and IPO underpricing. The empirical results shows: (1) pre-IPO marketing expenditures significantly reduce IPO underpricing levels, (2) pre-IPO marketing expenditures can reduce IPO underpricing levels following bear markets as it cannot reduce IPO underpricing levels following bull markets. Therefore, as firms decide to use marketing strategies to make their firm remarkable, and in turns without concerning for market states to reduce the degree of IPO underpricing, their objective may not be reached.