College of Business and Economics, West Virginia University, Morgantown, WV, 26506-6025.
The relationship between flexibility and market valuations has recently started attracting attention. Information Technology (IT) industry, by definition, is one of the most flexible industries. The primary assets for this industry are re-deployable human capital and embedded knowledge. IT Industry participants are unhampered by large fixed investments in physical assets and rigid processes. The incremental value placed by the stock market investors on this flexibility is measured using Initial Public Offering returns. The results indicate that investors in information technology industry IPOs earn significant excess positive returns. These excess returns occur across the board and are robust to market capitalization and exchange listing choices.
excess returns, flexibility, information technology, initial public offerings
