Valuation of IPO Companies in the IT industry in China with Financial and Non-Financial Information

CAI, Jing (2017) Valuation of IPO Companies in the IT industry in China with Financial and Non-Financial Information. [Dissertation (University of Nottingham only)]

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Abstract

This study investigates the valuations of initial public offering (IPO) firms in IT the industry in China from two perspectives: Firstly, this study examines the correlations between the valuation of IPO firms in IT the industry in China and a set of financial and non-financial information. The financial information is selected according to previous researches research that demonstrate the financial information is value-relevant and the non-financial information is selected on the basis of data accessibility and characteristics of the Chinese IT industry. Secondly, two valuation methods: the direct valuation method and the relative valuation method are adopted in this paper. After analyzing the direct valuation and the relative valuation, the comparison results between the two methods in finding value drivers for valuation of IPOs in Chinese IT industry are presented.

The primary findings are as follows: Firstly, as it is widely known that book value, earnings, cash flow from operating, and sales are value relevant as previous literature has demonstrated. Nevertheless, the correlations between the valuation and cash flow and sales are negative because of some certain characteristics of the Chinese IT industry (specifically high research and development expense and state-ownership).

Second, state ownership and ownership retention are crucial value drivers in the valuation of IPOs in the IT industry in China. State ownership has a particularly negative impact on valuation, resulting in a reduction of the firm’s value, while ownership retention has positive impact on valuation, meaning a lower percentage of shares outstanding will increase the firm’s value.

Key words: initial public offering (IPO); financial information; non-financial information; value driver; direct valuation method; relative valuation method.

Item Type: Dissertation (University of Nottingham only)
Keywords: initial public offering (IPO); financial information; non-financial information; value driver; direct valuation method; relative valuation method.
Depositing User: Cai, Jing
Date Deposited: 09 Apr 2018 14:44
Last Modified: 10 Apr 2018 14:40
URI: http://eprints.nottingham.ac.uk/id/eprint/46056

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