Melbourne Accounting Research Seminar - Donghui Wu

Donghui Wu from the Chinese University of Hong Kong will present a MARS seminar.

Topic: Expert Decision-Making and Fundamental Analysis: The Case of IPO Screen-ing in China

Abstract: The actual inputs used by experts in fundamental analysis has been a “black box”. To gain insight into expert decision making process and its informativeness, this study exploits a setting where Chinese regulators employ a panel of experts to make initial public offering (IPO) screening decisions (pass vs. reject) with disclosed reasons for rejections. By aggregating and modeling the IPO screening decisions with inputs of expert identified fundamentals, we find firms that pass the screening but with a higher likelihood of rejection have worse post IPO accounting performance, higher incidence of accounting irregularities, and subpar innovation activities. Insiders of such firms sell more shares when the lockup period expires. Moreover, such firms experience a lower first day closing price, a lower initial stock and a higher turnover rate upon the listing of their stocks and underperform in stock market over the long term. Our study underscores the value of collective wisdom inherent in expert decisions for investors.

This seminar will be conducted face-to-face. Register for this seminar

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