Abstract

This study examines the relationship between earnings per share forecast error and abnormal returns of newly listed companies on Tehran Stock Exchange in two periods of the coming year to stock exchange and one year after it. Therefore, data have been collected from 84 new companies in Tehran Stock Exchange during the period of 2003 to 2008. The results of this research have been shown using multivariate linear regression analysis. There is a significant positive relationship between earnings per share forecast error and abnormal returns of new entrants companies in the period studied, and this confirms that the estimated earnings per share have been used in an informational content. It affects the decision making of actual and potential investors, and increase or decrease the stock price. This relationship has also influenced the type of industry.

Key words: Initial public offering, abnormal returns, earnings per share forecast error, type of industry.