Recent Development of Firm Quality in Japanese IPO Market
In this paper, we examine the relationship between the sluggish IPO activity and the quality of IPO firms. We developed proxies of firm quality and found several interesting phenomena using those metrics; (1) the level of quality differs by the listing timing. Currently, stock exchanges seem never allow low quality firms to go public, (2) we could not observe any difference in firms’ quality on different junior markets, (3) even for firms with the same level of quality, the actual listing criteria may differ by industry, (4) stock exchanges and underwriters seem to fail to identify potential high-growth firms using their listing criteria. We need to mitigate the information asymmetry to revitalize the market.