IPOs: Evaluating Failure Risk

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Executive Summary

To what extent can one predict whether a new stock exchange listing or initial public offering (IPO) is going to fail? This is a question of major significance for investors and the firm's employees alike as the rate of delistings has increased dramatically over the years, with the probability of a new listing surviving in its first ten years falling sharply to 37 per cent by the 90s from 61 per cent in the early 70s. The authors say financial accounting plays an important role in assessing IPO failure risk.

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