Financial Statement Information and Evaluation of Newly Listed High-Technology Nano Caps

Abstract

This study examines the usefulness of financial statement information in evaluating very small newly listed high-technology nano cap firms’ (i.e., market capitalization less than USD 50 million) by employing data from 36 countries during the high investor sentiment era of 1995-2000. I find that financial statement information is useful in screening nano caps from non-nano caps as well as explaining nano caps’ delisting risk and valuing them. The evidence based on these three approaches is consistent with the view that financial statements provide useful information to investors for evaluating high financial risk, hard-to-value firms irrespective of the institutional setting during a high investor sentiment period.