The Relationship of Conservatism and Short Term Abnormal Returns of Initial Public Offerings with Emphasis on the Role of Information Asymmetry Models

This research follow up the relation between conservatism and short term abnormal returns of IPOs in Tehran Stock Exchange and also infusing of asymmetry information among beneficiaries in IPO’s procedure in mentioned relation. The results of regression analysis for companies which their stocks offered in Tehran Stock Exchange for period of 1382 to 1391 shows the relation between conservatism and short term abnormal returns of IPOs is meaningful and reverse. In the other word by increasing the level of conservatism, verifiability of presented information has been gone up and by decreasing of asymmetry information among beneficiaries in IPO’s procedure; short term abnormal return of this stock will be decrease. In the other hand the relation between conservatism and short term abnormal returns of IPOs in companies with high level of asymmetry information is stronger than companies with low level of asymmetry information.Also the results of research show the IPOs’ stocks have created averagely 26.07% Initial normal returns and 19.61% Initial abnormal returns (Returns adjusted by Market Portfolio) that confirmed the under pricing in Tehran Stock Exchange according to researchers in other countries.