The new capital raised in IPOs

2017 ◽  
Vol 43 (9) ◽  
pp. 966-981 ◽  
Author(s):  
Chuntai Jin ◽  
Tianze Li ◽  
Steven Xiaofan Zheng ◽  
Ke Zhong
Keyword(s):  
Research And Development ◽  
Initial Public Offerings ◽  
Design Methodology ◽  
Capital Expenditure ◽  
Operating Performance ◽  
Working Capital ◽  
Content Type ◽  
Public Offerings ◽  
Regression Tests

Purpose The purpose of this paper is to answer the following three questions about the new capital raised in initial public offerings (IPOs): why do some IPO companies raise a lot of new capital while some others do not? Where do the IPO companies use the new capital they raise in IPOs? How does the use of new capital affect the operating performance of IPO companies? Design/methodology/approach Matching firm approach, univariate and regression tests. Findings This paper finds that companies with higher research and development (R&D) spending, higher capital expenditure, lower working capital and more long-term debt tend to raise more capital in IPOs. These firms also spend more on R&D and capital expenditure. The results also suggest that the more the new capital firms raise in IPOs, the lower operating performance they have in subsequent years. However, firms spending more new capital on R&D and capital expenditure seem to perform better. Originality/value These results help us understand the behavior of IPO firms.

Exploring intellectual capital disclosure as a mediator for the relationship between IPO firm-specific characteristics and underpricing

2015 ◽  
Vol 16 (3) ◽  
pp. 639-660 ◽  
Author(s):  
Shaw Warn Too ◽  
Wan Fadzilah Wan Yusoff
Keyword(s):  
Initial Public Offerings ◽  
Intellectual Capital ◽  
Design Methodology ◽  
Firm Characteristics ◽  
Content Type ◽  
Public Offerings ◽  
Intangible Resources ◽  
The Cost ◽  
The Relationship ◽  
Practical Implications

Purpose – The purpose of this paper is to examine the direct and indirect impact of firm-specific characteristics on the level of underpricing among Malaysian initial public offerings (IPOs). Design/methodology/approach – Content analysis of IPO prospectuses was used for 331 firms underwent listing between 2002 and 2008. The extent of disclosure was computed by applying the disclosure index of Bukh et al. (2005). Findings – Of the five firm characteristics examined, there is a direct relationship between the firm’s financial performance and the level of foreign activity, and the level of underpricing, instead of being mediated through disclosure. However, some firm characteristics have direct influence on the extent of disclosure but do not have any influence on underpricing. Research limitations/implications – This empirical study concentrates on the Malaysian IPOs on a single disclosure mechanism. Other disclosure items can be examined together with the intellectual capital disclosure items. Practical implications – As the findings reveal that the extent of disclosure is relatively low in influencing the level of underpricing. Had the disclosure been higher, it may have some influence on underpricing. The accounting governance board need to regulate the disclosures of the intangible resources so that the level of underpricing can be minimized. Originality/value – This study provides new insight for the examination of direct and indirect (through disclosure) association between firm-specific characteristics and underpricing. The findings shed some lights to the IPO issuers to enhance disclosure so that the cost of capital can be reduced.

Opportunistic earnings management during initial public offerings: evidence from India

2016 ◽  
Vol 15 (3) ◽  
pp. 352-371 ◽  
Author(s):  
Rachappa Shette ◽  
Sudershan Kuntluru ◽  
Sunder Ram Korivi
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Market Performance ◽  
Discretionary Accruals ◽  
Content Type ◽  
Public Offerings ◽  
Earnings Performance ◽  
The Impact

Purpose This paper aims to examine the impact of initial public offerings (IPO)-year opportunistic earnings management on long-term market and earnings performance. Design/methodology/approach A sample of 150 book-built IPOs over 2001-2006 are analysed based on industry adjusted return on sales and industry adjusted return on assets for six post-IPO years. The quality of earnings is measured in two ways using discretionary accruals and Beneish manipulation score. Modified Jones model is used to estimate the expected accruals and to compute the discretionary accruals for each IPO firm year. Regression model is used to examine the impact of IPO-year quality of earnings on future earnings performance. Findings The paper finds that earnings and market performance of IPO companies are abnormally higher in the IPO-year, as compared to the post-IPO years. Similarly, the quality of earnings during the IPO-year is lower than those in the post-IPO years. The results also show that the opportunistic earnings management in IPO-year has significant negative impact on the long-term adjusted earnings and market performance. Research limitations/implications The present study is confined to the period from 2001 to 2006 for the purpose of post-IPO analysis for a period of six post-IPO years. Thus, the conclusions of this study are to be viewed with this limitation. Originality/value This paper is the first study based on the Indian context to examine the relationship between the quality of earnings of the IPO firm and long-term earnings and market performance.

Performance of VC/PE-backed IPOs: New Insights from India

2020 ◽  
pp. 097215092095054
Author(s):  
Soumya G. Deb ◽  
Pradip Banerjee
Keyword(s):  
Initial Public Offerings ◽  
Private Equity ◽  
Operating Performance ◽  
Equity Market ◽  
Venture Capitalists ◽  
Public Offerings ◽  
Market Perception ◽  
Using Data

This article explores long-term equity and operating performance of Indian firms issuing initial public offerings (IPOs) backed by venture capital/private equity (VC/PE) funding. Using data for 173 IPOs backed by VC/PE funding during 2000–2016, the article shows that equity market performance of VC/PE-backed IPOs is unimpressive post issue, compared to their peers. This is not only due to market perception but also associated with a declining operating performance. However, information asymmetry, mispricing and ‘timing the market’ by issuing firms do not seem to be the reasons for such long-term underperformance. We argue that it may be a case of too much money chasing too few winners for Indian IPOs and individual rent-seeking activities by managers. The observation raises the question of effectiveness of the monitoring role of venture capitalists or PE funders post the IPO in an Indian context. This is substantiated by our additional finding that sustained monitoring and hand-holding by venture capitalists and PE funders post the IPO cause an improvement in performance. The findings of this study can have significant implications for all stakeholders, particularly common investors in the Indian equity market.

UK FCA adopts changes to rules governing availability of information for IPOs

2018 ◽  
Vol 19 (2) ◽  
pp. 24-30
Author(s):  
Mark S. Bergman ◽  
John J. Satory ◽  
Sofia D. Martos
Keyword(s):  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Financial Services ◽  
Design Methodology ◽  
Content Type ◽  
Public Offerings ◽  
New Process ◽  
Practical Guidance ◽  
The Uk ◽  
Public Offering

Purpose This paper aims to summarize new disclosure and procedural rules and related guidance for initial public offerings in the UK that will become effective on July 1, 2018. Design/methodology/approach This study summarizes new disclosure and procedural rules and related guidance published by the Financial Conduct Authority intended to improve the quality and timeliness of key information made available to investors in advance of an initial public offering (IPO) in the UK, in particular the timing of the publication of IPO research by connected and unconnected analysts. Findings While it remains to be determined whether the new process will provide investors with more time to digest information about the issuer and its business and increase the likelihood that investors will place greater emphasis on the prospectus and less on research reports of connected analysts, at the very least, the publication of the prospectus or a registration document, rather than the intention to float announcement as is currently the case, will provide the first public confirmation that an IPO is imminent. Originality/value This study provides practical guidance from experienced securities and financial services lawyers.

Going public in Mexico

2018 ◽  
Vol 31 (1) ◽  
pp. 156-176
Author(s):  
María de las Mercedes Adamúz ◽  
José Luis Rivas
Keyword(s):  
Initial Public Offerings ◽  
Design Methodology ◽  
Probit Model ◽  
International Literature ◽  
Market Conditions ◽  
Going Public ◽  
Public Companies ◽  
Content Type ◽  
Public Offerings ◽  
Private And Public

Purpose The purpose of this paper is to examine the factors that affect the likelihood of being public using a comprehensive database of private and public companies in Mexico, from all sectors, during 2006-2014. Design/methodology/approach The authors estimate a longitudinal probit model to identify the ex ante characteristics of public Mexican firms that differentiate them from those Mexican firms that continue to remain private. Findings The authors find that larger, younger and less levered Mexican firms are more likely to be public in Mexico. They additionally test the influence of market conditions and location on the probability of being public. They find that location matters but they find no evidence that initial public offerings (IPOs) are driven by favorable Mexican market conditions. Originality/value This paper contributes to the Mexican and international literature on IPOs because it uses an original database built from information of private and public Mexican firms. The study contributes to a better understanding of the determinants of the decision of going public in Mexico.

scholarly journals POST‐IPO OPERATING PERFORMANCE IN BANGLADESH

2021 ◽  
Vol 7 (1) ◽  
pp. 1-16
Author(s):  
Md. Sajib Hossain ◽  
Muhammad Saifuddin Khan
Keyword(s):  
Initial Public Offerings ◽  
Capital Expenditure ◽  
Operating Performance ◽  
Jel Classification ◽  
Significant Decline ◽  
Debt Ratio ◽  
Public Offerings ◽  
Financial Firms ◽  
Asset Turnover ◽  
Over Time

This study attempts to investigate the change in the operating performance of firms as they go from private to public ownership. Using the data of all the non-financial firms, which floated initial public offerings (IPOs) from 2008 to 2015, this study finds that there is a significant decline in operating performance as measured by ROA, asset turnover, ROS, and OCFTA after the IPO and the decline continues for next two to three years with the highest deterioration of operating performance being observed in the immediate next year of IPO. Moreover, when the study uses age, debt ratio, sales, capital expenditure, and IPO event to explain the variation of the operating performance of IPO firms over time, it finds that IPO event negatively affects all measures of operating performance. Finally, the study finds that deterioration of the post-IPO operating performance is more pronounced for firms offering their securities with premium than firms offering securities without premium. JEL Classification Codes: G11, G12, G32.  

Six Sigma, stock returns and operating performance

2017 ◽  
Vol 40 (3) ◽  
pp. 331-351 ◽  
Author(s):  
Bora Ozkan ◽  
J. Francisco Rubio ◽  
M. Kabir Hassan ◽  
James R. Davis
Keyword(s):  
Stock Returns ◽  
Six Sigma ◽  
Design Methodology ◽  
Operating Performance ◽  
Fortune 500 ◽  
Operational Performance ◽  
Content Type ◽  
Fortune 500 Companies ◽  
Negative Growth

Purpose This paper aims to expand the literature on financial and operational performance by analyzing the effects of undergoing through Six Sigma training. Design/methodology/approach The effects of implementing Six Sigma trainings is analyzed for 108 Fortune 500 companies. The authors estimate long-term stock returns and 14 financial ratios of Six Sigma companies, both pre- and post-adoption periods. Furthermore, The authors match the 108 companies by size and industry to 108 non-Six Sigma companies also within the Fortune 500. Findings Looking at long-term stock returns, the evidence shows that Six Sigma firms need at least four years before they start to outperform the controlling sample. Furthermore, looking at operational performance, unlike prior reported results, the authors find supporting, and more importantly, persisting statistical evidence that Six Sigma firms are less liquid and have a negative growth in staff levels in comparison to the matching firms. Social implications The findings of this suggest that if Six Sigma provides any value to the company, it comes at the expense of overloaded staff levels, as evidenced by the fact that Six Sigma firms have less growth in staff levels than the matching firms. Originality/value It is one of the first paper to thoroughly investigate the effects on both financial performance and operational performance of spending, sometimes billions of dollars, in Six Sigma training.

Intended use of IPO proceeds and initial returns

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nurwati A. Ahmad-Zaluki ◽  
Bazeet Olayemi Badru
Keyword(s):  
Initial Public Offerings ◽  
Capital Expenditure ◽  
Critical Role ◽  
Ordinary Least Squares ◽  
Working Capital ◽  
Growth Opportunities ◽  
Content Type ◽  
Negatively Associated ◽  
Debt Repayment ◽  
Intended Use

Purpose This study aims to investigate the effects of the intended use of initial public offerings (IPO) proceeds that is disclosed in the prospectus on IPO initial returns. Design/methodology/approach A sample of IPOs listed on Bursa Malaysia from 2005 to 2015 is used. The intended use of IPO proceeds is categorised into three uses, namely, growth opportunities, debt repayment and working capital. In addition to ordinary least squares regression, the study applies a more sophisticated and robust approach using the quantile regression technique. Findings The results show that the intended use of IPO proceeds for growth opportunities and working capital is positively associated with IPO initial returns, whereas debt repayment is negatively associated with IPO initial returns. When the intended use of IPO proceeds for growth opportunities is further expanded into capital expenditure (CAPEX) and research and development (R&D), the intended use of IPO proceeds for CAPEX is positively associated with IPO initial returns, whereas R&D is negatively associated with IPO initial returns. Research limitations/implications These findings suggest that intended use of IPO proceeds provides useful information about IPO initial returns and investors can use this information as guidance to make informed decisions. In addition, regulatory authorities should pay close attention to the amount allocated to each intended use of IPO proceeds as this may play a critical role in the success of a company and the economy. Originality/value This study gives new empirical evidence on the desire and motivations of IPO and the usefulness of designated use of IPO proceeds disclosed in the prospectus in explaining IPO initial returns.

Earnings management and issue characteristics: an empirical analysis of IPOs in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Deepa Mangala ◽  
Mamta Dhanda
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Cross Sectional ◽  
Data Set ◽  
Content Type ◽  
Public Offerings ◽  
Profitability Premium ◽  
Insight Into

Purpose This study aims to examine earnings management around initial public offerings (IPOs) in India. It also explores the influence of issue characteristics on earnings management around the IPOs. Design/methodology/approach A sample of 511 IPOs that came during April 2003-March 2019 is studied for calculating earnings management for pre-issue, issue and post-issue years. Using Cross-Sectional Modified Jones Model, the paper presents earnings management on the basis of three proxies i.e. discretionary accruals, discretionary current accruals and discretionary long-term accruals. The influence of issue characteristics on earnings management practised around the IPOs is also observed through correlation and multiple regression analysis. Findings The paper finds that earnings management is abnormally high during the issue year compared with pre-issue and post-issue years. It also unveils that profitability, premium, age, and size of the issuer significantly determine the level of pre-issue and issue year earnings management practised by Indian IPO issuers. Research limitations/implications The findings are useful to stakeholders (potential investors, analysts and regulators) to observe, assess and understand the quality of financial numbers that are based on fallacious disclosure of accounting figures. It provides insight into the possibilities of managed earnings around the issue that could influence investors’ decision-making. Further, the study reflects the efficacy of Indian regulatory norms for IPOs. Originality/value To the authors’ knowledge, it is the only Indian study that had used an extensive data set of about two decades to calculate earnings management during pre-issue, issue and post-issue years. The uniqueness of the study further lies in three proxies of earnings management representing short-term and long-term accruals. Moreover, it is the first study to observe the influence of IPO issue characteristics on earnings management.

Earnings management and listing day performance of IPOs in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Deepa Mangala ◽  
Mamta Dhanda
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Cross Sectional ◽  
Financial Reports ◽  
Policy Makers ◽  
Content Type ◽  
Public Offerings ◽  
Industry Type ◽  
The Impact

PurposeThe purpose of this study is to examine the influence of earnings management during initial public offerings on the listing day returns.Design/methodology/approachThe study collected data for 511 Indian IPOs that came between April 2003 and March 2019 for calculating earnings management. On the basis of the Cross Sectional Modified Jones Model 1995, the paper presents three proxies of earnings management as discretionary accruals (DA), discretionary current accruals (DCA) and discretionary long-term accruals (DLA). The study further used correlation and multiple regression analysis to assess the impact of earnings management on listing day returns.FindingsThe findings show that earnings management and listing day returns vary through issue-year and industry-type. Apart from it, the study reveals a greater contribution of short-term accruals in earnings management on the basis of higher DCA values. It also discloses that the aggregate level of earnings management (DA) influences listing returns, whereas DCA and DLA separately have no impact on the listing day returns of the Indian IPOs.Research limitations/implicationsThe findings are useful to potential investors and analysts to observe, assess and understand the quality of financial reports that are based on fallacious disclosure of accounting figures. The study also reflects the efficacy of Indian regulatory norms for IPOs in constraining earnings management and underpricing, thus providing meaningful insight to the policy makers and the regulators.Originality/valueThis study is distinguished by its focus on determining the influence of earnings management on listing day returns in Indian IPOs by using three earnings management proxies.

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