Provide a Model of the Effect of Group Companies and Accounting Information Quality on valuation of Initial Public Offering

Abstract

This study presents a model of group companies degree and accounting information quality effects on initial public offering valuation in companies listed in Tehran Stock Exchange. To test hypotheses, data is collected from 77 companies listed in Tehran Stock Exchange for an eight-year period from the beginning of 2011 to end of 2018 and then statistical tests are performed.The valuation of shares in initial public offering is possible based on group companies similarity and the quality of the accounting information. Stock valuation in initial public offerings based on profit and sales approaches differs in terms of similarity of group companies and the quality of the company's accounting information. Similarity of accounting information quality adjusts effects of group companies on initial public offering valuation. Stock valuation based on group companies and the quality of accounting information are associated with incorrect pricing (overvaluation and undervaluation) in initial public offerings.Accounting information is a part of information an investor uses to predict future cash flows to achieve the estimated value of stocks.

Keywords

• group companies
• accounting information quality
• valuation of initial public offering of stocks