Correlation Analysis of Time Value of Cash Flow and Pricing in IPO Enterprises —— Based on Multi-period Cash Flow Model
Main Article Content
Keywords
initial public offering, time value of cash flow, DCF valuation, PE method
Abstract
In recent years, growth and technology-based companies account for a relatively high proportion of A-share IPO enterprises, and the fluctuation of cash flow and rising capital expenditure make the issue pricing more uncertain. In this paper, based on the multi-period cash flow model, the correlation between the time value of cash flow and IPO pricing is discussed, taking the IPO enterprises of science and technology innovation board Growth Enterprise Market as samples from 2024 to 2025. Through sample selection, unified parameter setting, correlation analysis, unary linear regression and comparison of pricing deviation, this paper finds that the direct explanatory power of discount rate to IPO issue price is weak, and the explanatory effect of DCF model is limited in the whole sample, but it is obviously enhanced after excluding abnormal samples, while PE method is closer to the actual issue price as a whole. The research shows that the multi-period cash flow model has a conditional explanatory function in IPO pricing, and its applicability is constrained by the stability of cash flow and the market pricing mechanism.
References
- [1] Wei, L., & Yu, R. H. (2024). Creative research on enterprise IPO valuation under the registration-based system. Management & Technology of SMEs, (24), 176–178.
- [2] Song, S. L. (2022). Chinese-style IPO pricing: A literature review. Journal of Central University of Finance & Economics, (1), 51–63.
- [3] Sun, F., Yin, C., Zhou, S., & Zhu, Z. (2022). IPO underpricing and mutual fund allocation: New evidence from registration system. International Review of Financial Analysis, 84, 102405.
- [4] Hiraki, T., & Ito, A. (2023). Two-step price adjustments of IPO book building in Japan. Pacific-Basin Finance Journal, 78, 101977.
- [5] Liu, L. X., Lu, R., Sherman, A. E., & Zhang, Y. (2023). IPO underpricing and limited attention: Theory and evidence. Journal of Banking & Finance, 154, 106932.
- [6] Espenlaub, S., Mohamed, A., & Saadouni, B. (2024). Underwriter incentives and IPO pricing. Journal of Corporate Finance, 87, 102625.
- [7] Bhurjee K, Saragur Ramanna V. Preopening auctions and price discovery in initial public offerings[J]. Journal of Banking & Finance, 2024, 165: 107196. DOI: 10.1016/j.jbankfin.2024.107196.
- [8] Rossovski J, Lucey B, Helbing P. Determinants of IPO overpricing[J]. British Journal of Management, 2025, 36(1): 383-399. DOI: 10.1111/1467-8551.12858.
- [9] Farooque O A, Chowdhury A, Tarique K M. The impact of lead underwriter ranking on the offer price revision of IPO firms: Evidence from the US[J]. Investment Analysts Journal, 2025. DOI: 10.1080/10293523.2025.2578128.
- [10] Han Y, Zhang C. Social media analysts, investor attention, and IPO underpricing[J]. The British Accounting Review, 2025: 101748. DOI: 10.1016/j.bar.2025.101748.
- [11] Guo Y, Li L Y, Zhong H. Bigger pie, bigger slice: Liquidity, value gain, and underpricing in IPOs[J]. Journal of Financial Markets, 2025, 72: 100949. DOI: 10.1016/j.finmar.2024.100949.
- [12] Huang S, Tan H, Wang X, Yu C. Valuation uncertainty and analysts’ use of DCF models[J]. Review of Accounting Studies, 2023, 28(2): 827-861. DOI: 10.1007/s11142-021-09658-w.
- [13] Lof M, Nyberg H. Discount rates and cash flows: A local projection approach[J]. Journal of Banking & Finance, 2024, 162: 107127. DOI: 10.1016/j.jbankfin.2024.107127.
- [14] Vonlanthen, J. (2024). On the determinants of discount rates in discounted cash flow valuations: A counterfactual analysis. Real Estate, 1(2), 174-197.
Article Sidebar
This work is licensed under a Creative Commons Attribution 4.0 International License.