Abstract
ABSTRACTThis study examines whether pre-IPO brand diversification is related to IPO returns in the restaurant industry. More precisely, the study examines whether brand-diversified restaurant firms experience a lower underpricing in their IPO relative to non-diversified (focused) restaurant firms. Second, the study investigates whether pre-IPO brand diversification affects long-run returns of restaurant IPOs. The sample of study is 106 restaurant firms that completed an IPO between 1981 and 2015. For primary analyses, t-test and ordinary least square regression are used. Findings of the study reveal that pre-IPO brand diversification is a significant firm attribute for a restaurant firm that goes through an IPO. Brand-diversified restaurant firms’ shares are more accurately priced by the investors, therefore they experience underpricing to a significantly lesser degree than focused restaurant firms. The study finds mixed evidence for the long-run returns. In most part, multivariate analyses suggest that pre-IPO brand diversification does not affect the long-run IPO returns of restaurant firms.
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