Abstract
In this paper we explore the information conveyed by earnings and revenue surprises for IPO firms. Further, we examine the persistence of earnings and revenue surprises and the characteristics of IPO firms with extreme earnings and revenue surprises. We find a positive relation between announcement returns and both standardized unexpected earnings (SUE) and standardized unexpected revenue (SUR). We also find a positive relation between revenue surprises and one-year holding period returns. Overall, investors appear to pay more attention to the direction than magnitude of earnings and revenue surprises in the short-run but more on the magnitude of revenue surprises in the long-run. Our results suggest that it is hard for IPO firms to continuously surprise investors in terms of earnings and revenues.
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