Impact of disclosure of risk factors on the initial returns of initial public offerings (IPOs)

2018 ◽  
Vol 31 (1) ◽  
pp. 46-62 ◽  
Author(s):  
Shaista Wasiuzzaman ◽  
Fook Lye Kevin Yong ◽  
Sheela Devi D. Sundarasen ◽  
Noor Shahaliza Othman
Keyword(s):  
Risk Factors ◽  
Initial Public Offerings ◽  
Ordinary Least Squares ◽  
Investment Risk ◽  
Least Squares Regression ◽  
Risk Disclosure ◽  
Content Type ◽  
Public Offerings ◽  
The Individual ◽  
Overall Risk

Purpose When a firm goes public for the first time, its prospectus serves as an important reference for investors. It is required by regulation that the risk factors which have significant influence on the business be disclosed in the prospectus. The purpose of this study is to analyze how disclosure of these risk factors influences the initial returns of initial public offerings (IPOs). Design/methodology/approach To do this, a sample of 96 Malaysian new equity offerings (IPOs) from year 2009 to year 2013 is used. Ordinary least squares regression technique is used to regress initial returns against risk disclosures. Aside from overall risk disclosure, individual dimensions of risk (internal risk, external risk and investment risk) are also considered. Findings Results of the regression analyses reveal a direct relationship between the IPO initial returns and the disclosure of risk. Overall risk disclosure is found to be highly significant in influencing initial returns. However, further investigation into the individual group of risks shows that only investment risk is highly significant in influencing IPO initial returns. Originality/value The results found in this study are interesting as, unlike prior studies, it is shown that disclosures of internal and external risks are not significant in influencing investors’ actions possibly because of their generalizability, whereas disclosures related to investment risks are significant. Equity of firms which disclose more of its risk factors can be expected to generate higher initial returns.

Audit committee characteristics and the moderating effect of Malaysian code of corporate governance on IPO liquidity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amal Mohammed Al-Masawa ◽  
Rasidah Mohd-Rashid ◽  
Hamdan Amer Al-Jaifi ◽  
Shaker Dahan Al-Duais
Keyword(s):  
Corporate Governance ◽  
Initial Public Offerings ◽  
Audit Committee ◽  
Ordinary Least Squares ◽  
Moderating Effect ◽  
Least Squares Regression ◽  
Content Type ◽  
Code Of Corporate Governance ◽  
The Impact ◽  
The Relationship

Purpose This study aims to investigate the link between audit committee characteristics and the liquidity of initial public offerings (IPOs) in Malaysia, which is an emerging economy in Southeast Asia. Another purpose of this study is to examine the moderating effect of the revised Malaysian code of corporate governance (MCCG) on the link between audit committee characteristics and IPO liquidity. Design/methodology/approach The final sample consists of 304 Malaysian IPOs listed in 2002–2017. This study uses ordinary least squares regression method to analyse the data. To confirm this study’s findings, a hierarchical or four-stage regression analysis is used to compare the t-values of the main and moderate regression models. Findings The findings show that audit committee characteristics (size and director independence) have a positive and significant relationship with IPO liquidity. Also, the revised MCCG positively moderates the relationship between audit committee characteristics and IPO liquidity. Research limitations/implications This study’s findings indicate that companies with higher audit committee independence have a more effective monitoring mechanism that mitigates information asymmetry, thus reducing adverse selection issues during share trading. Practical implications Policymakers could use the results of this study in developing policies for IPO liquidity improvements. Additionally, the findings are useful for traders and investors in their investment decision-making. For companies, the findings highlight the crucial role of the audit committee as part of the control system that monitors corporate governance. Originality/value To the authors’ knowledge, this work is a pioneering study in the context of a developing country, specifically Malaysia that investigates the impact of audit committee characteristics on IPO liquidity. Previously, the link between corporate governance and IPO liquidity had not been investigated in Malaysia. This study also contributes to the IPO literature by providing empirical evidence regarding the moderating effect of the revised MCCG on the relationship between audit committee characteristics and IPO liquidity.

The determinants of internet risk disclosure: empirical study of Egyptian listed companies

2017 ◽  
Vol 32 (8) ◽  
pp. 746-767 ◽  
Author(s):  
Ali Khalil ◽  
Mona Maghraby
Keyword(s):  
Listed Companies ◽  
Ordinary Least Squares ◽  
Risk Information ◽  
The Internet ◽  
Least Squares Regression ◽  
Risk Disclosure ◽  
Content Type ◽  
Reporting Practices ◽  
Board Characteristics ◽  
The Impact

Purpose The purpose of this paper is to contribute to the existing disclosure literature by examining the determinants of corporate risk disclosure (CRD) in the internet reporting for a sample of Egyptian listed companies on the Egyptian Stock Exchange (EGX). Design/methodology/approach This study depends on a sample of 76 Egyptian companies included in the EGX 100 in the period 2012-2014. The study applies a content analysis and uses a sentence-based method to measure CRD in the internet reporting. Ordinary least-squares regression analysis is used to examine the impact of firm and board characteristics on CRD in the internet reporting. Findings The empirical analysis shows that large Egyptian companies tend to disclose more risk information in their internet reporting. Moreover, the results indicate that there is a significant positive association between sector type and CRD in the internet reporting. The results show non-significant association between CRD and other firm characteristics (cross listing and level of risk). Finally, there are no significant associations between CRD and board characteristics variables (board size, board composition and CEO duality). Research limitations/implications The study’s findings have practical implications. It aids in informing policy makers considering implementing new economic reform programs about the properties of Egyptian companies that disclose risk information in their internet reporting. It provides insights on CRD in Egyptian companies for standards setters and professional authorities to improve risk reporting practices to help stakeholders in making good decisions. Originality/value This study is one of the first studies to examine the determinants of CRD in the internet reporting for a sample of Egyptian companies.

scholarly journals Disclosure of Risk Factors on Prospectus and Initial Public Offerings (IPO) Performance: Evidence from Indonesia

2020 ◽  
Vol 15 (1) ◽  
pp. 15
Author(s):  
Randy Kuswanto
Keyword(s):  
Initial Public Offerings ◽  
Negative Impact ◽  
Stock Exchange ◽  
Investment Decision ◽  
Ordinary Least Squares ◽  
Risk Information ◽  
Risk Disclosure ◽  
Public Offerings ◽  
Qualitative And Quantitative ◽  
Investment Decision Making

The purpose of this study is to investigate how risk information disclosed in prospectus influences the initial returns of initial public offerings (IPOs) in Indonesia. This study collected 62 sample IPOs offered in the Indonesian Stock Exchange from 2017–2018. Ordinary least squares was performed to test the association between risk disclosure and initial returns. Results indicate that prospectus provides risk information associated with initial returns. Both qualitative and quantitative dimensions have a significant negative impact on the initial returns. It can be concluded that risk information has an important role in the underpricing phenomenon. The study has extended the available literature by investigating risk disclosure from a dual perspective. Moreover, qualitative and quantitative assessments both have a direct impact on the initial returns and must be considered in investment decision making. Keywords: Risk, IPO, underpricing, initial returns

Human resource executives and post-IPO firm growth

2018 ◽  
Vol 31 (7) ◽  
pp. 1401-1418
Author(s):  
Carrie A. Belsito ◽  
Christopher R. Reutzel ◽  
Jamie D. Collins
Keyword(s):  
Human Resource ◽  
Initial Public Offerings ◽  
Firm Growth ◽  
Ordinary Least Squares ◽  
Top Management ◽  
Least Squares Regression ◽  
Firm Level ◽  
Content Type ◽  
Public Firms ◽  
Test Study

Purpose The purpose of this paper is to examine the relationship between human resource (HR) executive representation in top management and the growth of newly public firms. It draws upon research on strategic leadership, strategic HR management and Penrose’s theory of firm growth to consider the role of HRs executives in addressing demands placed upon top managers in the pursuit of firm growth. This study attempts to extend the focus of research on the influence of HR executives on organizational outcomes Design/methodology/approach In order to test study hypotheses, this study analyses data from a sample of US newly public firms that underwent initial public offerings (IPO) during the 2007 calendar year. Study data were analyzed using ordinary least squares regression in order to test study hypotheses. Findings This study provides general support for study hypotheses. First, HR executive presence in top management was found to be positively related to post-IPO firm growth. Second, upper echelon size and the number of firm employees were found to weaken the positive effect of HR executive presence in top management on post-IPO firm growth. Research limitations/implications As a consequence of study design, the results found in this study may be limited with respect to their external validity. Therefore, researchers and practitioners are encouraged to use caution before generalizing study findings to other contexts. Practical implications This study provides implications for top management team staffing and the pursuit of firm growth. Newly public firms appear to benefit in terms of firm growth by including HR executives in top management. The benefits of doing so appear to be reduced for newly public firms as the size of their upper echelons and number of employees increase. Originality/value This study extends research on the firm level consequences of HR executive presence in top management as well as research on factors which influence firm growth.

Characteristics and determinants of the board of directors of growing Spanish SMEs going public

2019 ◽  
Vol 26 (3) ◽  
pp. 363-380 ◽  
Author(s):  
María-José Palacín-Sánchez ◽  
Francisco Bravo ◽  
Nuria Reguera-Alvarado
Keyword(s):  
Board Of Directors ◽  
Initial Public Offerings ◽  
Ordinary Least Squares ◽  
Board Structure ◽  
Least Squares Regression ◽  
Going Public ◽  
Content Type ◽  
The Board Of Directors ◽  
Study Characteristics ◽  
The Moment

Purpose The purpose of this paper is to examine the characteristics and the determinants of board structure in small- and medium-sized enterprises (SMEs) in the process of going public within the continental European corporate system. Design/methodology/approach These issues are explored through the study of all the initial public offerings (IPOs) in the Spanish equity market for growing SMEs, and the statistical methodologies of ordinary least squares regression and stepwise regression are applied. Findings The results show that board size is larger than the minimum level established in law and that boards are composed of a majority of non-executive directors. In addition, the determinants of firm characteristics of board structure are firm age, level of financial leverage, and ownership structure. Practical implications This research is significant since its findings should help entrepreneurs reflect on which board structure is most appropriate for this new stage of the life cycle of their company as a listed firm. This evidence is also of interest for regulators and investors, who can, therefore, better understand board structures of SMEs at the moment of IPO. Originality/value This paper is the first to study characteristics and determinants of the board of directors of growing SMEs at the moment of going public. This study implies a step forward in research into the governance of small business and IPO literature, since the results differ from the evidence found for large company IPOs and contribute towards the debate regarding the need to consider the context and the type of firm in corporate governance studies.

Allocation discretion, price discounts and returns in Turkish initial public offerings

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lokman Tutuncu
Keyword(s):  
Least Squares ◽  
Initial Public Offerings ◽  
Institutional Investors ◽  
Ordinary Least Squares ◽  
Foreign Investors ◽  
Content Type ◽  
Public Offerings ◽  
Price Discounts ◽  
Retail Investors ◽  
Research Period

Purpose This study aims to investigate whether underwriters exercise their allocation discretion to offer favorable discounts to institutional investors. Design/methodology/approach The research covers 173 offerings at Borsa Istanbul between 2010 and September 2021. Two hypotheses related to allocation discretion are developed and tested by means of probit, ordinary least squares and two-stage least squares regressions. Heckman selection regressions are used for robustness tests. Findings Allocation discretion is catered toward institutional investors who account for more than 56% of all initial allocations adjusted by gross proceeds. Close to 84% of all gross proceeds come from offerings that allocation discretion is exercised. These discretionary offerings are sold with larger price discounts, yet provide lower initial returns, while evidence points to reallocation to retail investors due to weak demand from institutional investors. Research limitations/implications Despite using the population of firms in the research period, the sample size is small relative to more developed markets. The research period cannot be extended because allocation discretion is allowed in 2010. Practical implications The research highlights the importance of institutional and foreign investors to the equity markets. This issue is relevant due to the ongoing flight of foreign investors from emerging economies and the increasing participation of small investors in the stock markets. Social implications The study cautions retail investors against greater (re)allocations by underwriters who may seek to compensate for the loss of their foreign investor base and urges policymakers to regain foreign investors. Originality/value To the best of the authors’ knowledge, this is the first research paper to use actual discounts disclosed in the prospectus to test the predictions related to allocation discretion. The study also contributes to the emerging markets literature by documenting allocation practices of the Turkish underwriters for the first time.

Recombine supplier-side search via innovation ambidexterity

2019 ◽  
Vol 49 (2) ◽  
pp. 178-199 ◽  
Author(s):  
Yu Wang ◽  
Tao Jia ◽  
Jinliang Chen ◽  
Hongyi Sun
Keyword(s):  
Boundary Conditions ◽  
Boundary Spanning ◽  
Ordinary Least Squares ◽  
Mediating Effect ◽  
Least Squares Regression ◽  
Entire Study ◽  
Content Type ◽  
Individual Effects ◽  
The Individual ◽  
The Relationship

Purpose The purpose of this paper is to investigate the individual effects of boundary-spanning search from suppliers (supplier-side search (SS)). It is proposed that SS contributes to innovation ambidexterity (IA) and then business performance (BP). Further, this paper includes buyer–supplier relationships (BSRs) and competitive intensity (CI) as moderators to clarify boundary conditions. Design/methodology/approach An ordinary least squares regression was employed to test hypotheses, based on 184 sets of data from Hong Kong manufacturing firms. The SPSS version of PROCESS was utilized. Findings The results show that IA partially mediates the relationship between SS and BP. Contingently, the direct effect is negatively moderated by BSRs and CI. Research limitations/implications This paper confirms the partial mediating effect of IA on the relationship between SS and BP. Additional mediators, such as organizational innovation and marketing innovation, can be examined in the future. Practical implications This paper contributes to practice by suggesting that suppliers are a rewarding single source for firms to undertake boundary-spanning search. IA plays a significant role in reinforcing the effects of SS on BP and should be implemented with sustaining efforts. BSRs and CI can be detrimental and should be responded to cautiously. Originality/value This paper highlights the individual effects of SS on BP. Furthermore, the underlying process and boundary conditions are analyzed. The exploitation-exploration framework is applied throughout the entire study.

An examination of SEC revenue recognition comments and IPO earnings management

2018 ◽  
Vol 31 (3) ◽  
pp. 371-387 ◽  
Author(s):  
Michael Schuldt ◽  
Jose Vega
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Positive Association ◽  
The United States ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Revenue Recognition ◽  
Content Type ◽  
Management Measures ◽  
Regulatory Scrutiny

Purpose The purpose of this study is to examine the association between revenue-based earnings management in the periods immediately before and after firms’ initial public offerings (IPOs) and regulatory scrutiny by the United States Securities and Exchange Commission (SEC) during review of IPO firms’ registration statements. Design/methodology/approach This paper uses conditional discretionary revenues (Stubben, 2010) as its measure of earnings management, and revenue recognition comments delivered by the SEC as its measure of regulatory scrutiny. The authors use ordinary least squares regression (OLS) models, as well as a supplemental count model, to assess the association between conditional discretionary revenues and revenue recognition comments delivered by the SEC. Findings This study finds evidence of a positive association between earnings management measures in the pre-IPO period and the number of revenue recognition comments received by those firms during the SEC’s review. Furthermore, this study provides evidence that greater numbers of comments are associated with declining earnings management measures in the post-IPO period. However, the evidence suggests that these associations apply only to income-decreasing earnings management. Originality/value This paper extends the IPO earnings management literature by using conditional discretionary revenues as the measure of earnings management, and contributes to a nascent research stream in the accounting literature by investigating the SEC’s comment letter process and its association with, and impact upon, earnings management in the IPO process.

The impact of executives’ perceptions of environmental threats and organizational slack on innovation strategies

2016 ◽  
Vol 7 (2) ◽  
pp. 216-230 ◽  
Author(s):  
Chengyuan Wang ◽  
Biao Luo ◽  
Yong Liu ◽  
Zhengyun Wei
Keyword(s):  
Cognitive Theory ◽  
Environmental Changes ◽  
Ordinary Least Squares ◽  
Organizational Slack ◽  
Least Squares Regression ◽  
Content Type ◽  
Environmental Threats ◽  
Innovation Strategies ◽  
The Impact ◽  
The Relationship

Purpose The paper aims to study the relationship between executives’ perceptions of environmental threats and innovation strategies and investigate the moderating effect of contextual factor (i.e. organizational slack) on such relations. It proposes a dualistic relationship between executives’ perceptions of environmental threats and innovation strategies, in which different perceptions of environmental threats will lead to corresponding innovation strategies, and dyadic organizational slack can promote such processes. Design/methodology/approach The paper is based on a survey with 163 valid questionnaires, which were all completed by executives. Hierarchical ordinary least-squares regression analysis is used to test the hypotheses proposed in this paper. Findings The paper provides empirical insights about that executives tend to choose exploratory innovation when they perceive environmental changes as likely loss threats, yet adopt exploitative innovation when perceiving control-reducing threats. Furthermore, unabsorbed slack (e.g. financial redundancy) positively moderates both relationships, while absorbed slack (e.g. operational redundancy) merely positively influences the relationship between the perception of control-reducing threats and exploitative innovation. Originality/value The paper bridges the gap between organizational innovation and cognitive theory by proposing a dualistic relationship between executives’ perceptions of environmental threats and innovation strategies. The paper further enriches innovation studies by jointly considering both subjective and objective influence factors of innovation and argues that organizational slack can moderate such dualistic relationship.

Estimating defaults in organized security lending markets

2016 ◽  
Vol 24 (3) ◽  
pp. 343-362
Author(s):  
Latif Cem Osken ◽  
Ceylan Onay ◽  
Gözde Unal
Keyword(s):  
Credit Risk ◽  
Stock Returns ◽  
Stock Price ◽  
Price Volatility ◽  
Equity Market ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Content Type ◽  
Central Counterparties ◽  
Risk Determinants

Purpose This paper aims to analyze the dynamics of the security lending process and lending markets to identify the market-wide variables reflecting the characteristics of the stock borrowed and to measure the credit risk arising from lending contracts. Design/methodology/approach Using the data provided by Istanbul Settlement and Custody Bank on the equity lending contracts of Securities Lending and Borrowing Market between 2010 and 2012 and the data provided by Borsa Istanbul on Equity Market transactions for the same timeframe, this paper analyzes whether stock price volatility, stock returns, return per unit amount of risk and relative liquidity of lending market and equity market affect the defaults of lending contracts by using both linear regression and ordinary least squares regression for robustness and proxying the concepts of relative liquidity, volatility and return constructs by more than variable to correlate findings. Findings The results illustrate a statistically significant relationship between volatility and the default state of the lending contracts but fail to establish a connection between default states and stock returns or relative liquidity of markets. Research limitations/implications With the increasing pressure for clearing security lending contracts in central counterparties, it is imperative for both central counterparties and regulators to be able to precisely measure the risk exposure due to security lending transactions. The results gained from a limited set of lending transactions merit further studies to identify non-borrower and non-systemic credit risk determinants. Originality/value This is the first study to analyze the non-borrower and non-systemic credit risk determinants in security lending markets.

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