How Do Underwriters Select Peers When Valuing IPOs?

Valuing initial public offerings (IPOs) using multiples allows underwriters discretion when selecting comparable firms. We find that they systematically exclude candidate comparable firms that make a given IPO appear overvalued. On average, comparable firms published in official prospectuses have 13%‐38% higher valuation multiples than those obtained from matching algorithms or selected by sell‐side analysts, including the same underwriter's analyst after the IPO. Even if IPOs are priced at a discount as compared to peers selected by the underwriters, they are still at a premium with regard to alternatively selected peers. Greater bias in the underwriter's selection of peers leads to poorer long run performance.     

Can Spending Time in the Minors Pay Off? An Examination of the Canadian Junior Public Equity Markets

This paper tests whether the junior public equity markets serve as an effective development market for early‐stage firms compared to private venture capital (VC). Focusing on the Canadian market, we compare the long‐run stock performance of firms that graduate from the Toronto Venture Stock Exchange (TSX‐V) to the Toronto Stock Exchange (TSX) against the performance of VC‐backed firms that have a direct IPO on the TSX. Controlling for various confounders and possible selection biases, we find that TSX‐V graduations significantly outperform VC‐backed IPOs by 28.2 percentage points in the three years following the TSX listing. Our results are consistent with the idea that a TSX‐V listing provides the insiders of early‐stage companies with valuable public‐markets experience.     

The effects of pay regulation when agents are loss averse

This article analyses the effects of a regulatory cap on executive pay when the agent is loss averse. I use a principal–agent model with moral hazard in which a principal and an agent bargain over an incentive contract. I show that even a non-binding cap on the agent’s payments can have consequences for the bargained outcome and consequently for the effort the agent exerts.     

The effects of stricter regulation on the going public decision of small and knowledge-intensive firms

This paper studies the impact of increased securities regulation on the IPOs of small and high-tech, knowledge-intensive firms. We take advantage of the adoption of European SOX-like provisions, staggered at different dates across European countries, to test its influence on the going public decision. Starting from the population of European private firms during 1995–2012, we find that the likelihood of going public has decreased among small and high-tech, knowledge-intensive firms. Consistently, we document a 6% and 8.5% decrease in the industry-adjusted Tobin's Q of small and knowledge-intensive firms that go public after the regulatory change.     

Green supply chain management in the automotive industry: A study in Brazil

The auto industry is experiencing a time of restlessness, which stems from several elements that currently threaten the stability and status quo of its supply chains. Among these elements are autonomous driving, connectivity, electrification, and trip sharing that has led to new forms of mobility. In this context, this article presents the results of a research, which had three main objectives: (1) to identify the green supply chain management (GSCM) practices most commonly implemented in all industrial sectors worldwide, (2) to evaluate how these practices are considered by professionals in the automotive industry and by researchers working on the subject in Brazil, and (3) to identify and evaluate which practices are most widely adopted within these companies and/or supply chains and influence their environmental performance. The research method combined a qualitative research step (Delphi) with another quantitative one (survey). The results show that most of the reality of the automotive industry in Brazil is in line with studies on GSCM practices worldwide, but some specific findings have also been identified and discussed.     

Europe's Second Markets for Small Companies

European stock exchanges have repeatedly opened second markets to list small companies. We explain the motivation for the creation of these second markets, and the reasons why many of them have failed. We find that the average long‐run performance of initial public offerings (IPOs) on second markets is dramatically worse than for main market IPOs. However, the second markets have provided firms with the opportunity to raise funds at the IPO and in follow‐on offerings. The relative success of London's AIM, which is an exchange‐regulated market with minimal regulations, has led other European stock exchanges to establish similar non‐EU regulated second markets. Most of the IPOs on these exchange‐regulated markets are offered exclusively to institutional investors, and are equivalent to private placements. These IPOs, which frequently raise only a few million euros, rarely develop liquid trading.     

Collusive dominant-strategy truthfulness

We show that collusion and wrong beliefs may cause a dramatic efficiency loss in the Vickrey mechanism for auctioning a single good in limited supply. We thus put forward a new mechanism guaranteeing efficiency in a very adversarial collusion model, where the players can partition themselves into arbitrarily many coalitions, exchange money with each other, and perfectly coordinate their actions. Our mechanism bypasses classic impossibility results (such as those of Green and Laffont, and of Schummer) by providing the players with a richer set of strategies, making it dominant for every coalition C to instruct each of its members to report truthfully not only his own valuation, but also his belonging to C. Our mechanism is coalitionally rational, which implies being individually rational for independent players.     

Valuation Accuracy and Infinity Horizon Forecast: Empirical Evidence from Europe

This paper focuses on the assumptions of infinite-horizon forecasting in the field of firm valuation. The estimate of long-run continuing values is based on the hypothesis that companies should have reached the steady state at the end of the period of explicit forecasts. It is argued that the equivalence between cash accounting and accrual accounting is the way of verifying the steady-state assumption, defined as the state when a firm earns exactly its cost of capital, i.e., what we would expect in pure-competition settings. From this definition, we derive that the "ideal" growth rate to use in steady state is equal to the reinvestment rate times Weighted Average Cost of Capital. To validate our approach, we collect a sample of 784 analyst valuations and compare how the implied target prices deviate from what the target prices would have been using the "ideal" steady-state growth rates. Using Logit and Cox regression models, we find that this deviation has predictive value over the probability that actual market price reaches the target price over the following 12-month period—the smaller the deviation the greater is the likelihood that the market price reaches the target price.     

The impacts of climate change on tourist mobility in mountain areas

This study investigates the effects of climate change on tourist mobility in mountain areas, distinguishing between infrastructure, transport operation and travel demand. We examine change in tourist travel demand by proposing a two-step approach to forecast its future development. A multi-origin, multi-destination model for tourism demand quantifies the variation in overnight stays within a given region, and a linear, deterministic model determines the traffic-related implications. The method, tested on the Autonomous Province of South Tyrol (Italy), exhibits expected variations in winter and summer travel demand up to 2080 under different scenarios. Results reveal that average summer traffic can be more than twice as intense as average winter traffic, contributing to significantly increasing the peak days of congestion along the Provincial road network. Despite this evidence, all stakeholders seem to be at an early stage in incorporating this information into their strategic planning. The need for adequate transport policies and measures is considered essential to obtain the optimal balance of transport modes that will be required in the near future.