Are initial public offerings significant to firm performance in an emerging stock market? Evidence from China

Abstract

urpose:This study investigates firm performance after going public and explores whether Initial Public Offerings (IPOs) contribute to it.Design/methodology/approach: This study employs comprehensive regression models to examine IPO significance to both operating performance and market performance.Findings/results: It suggests that IPO firms retain their growth over the first 3 years after going public, but the growth does not sustain after the third year in terms of profit-related indicators, which is distinguishing from prior research. IPOs may contribute to firms’ market performance only, they are insignificant to firms’ operating performance in general, whilst industry-adjusted evidence suggests that IPOs are negatively associated with operating performance in terms of return on assets, return on sales and debt to assets.Practical implications: The practical implication for managers is to spend more IPO capitals on business operations to maximise firm value.Originality/value: Market value is taken into account, whilst operating performance is considered only by prior research, and it presents some different findings from prior studies based on developed stock markets.

Enquanto uns choram outros vendem lenços: indicadores econômico-financeiros das empresas do setor de tecnologia da informação em tempos de incerteza

“…Um evento importante que interfere no desempenho operacional das empresas refere-se ao IPO. Para Gao, Long & Zhao (2021) as empresas têm políticas diferentes entre pré e pós IPO. Antes de abrir o capital, as empresas de IPO gastam a maior parte de seu dinheiro na promoção do desempenho operacional da empresa para diminuir seu nível de endividamento e suas taxas de juros e mostrar seu potencial de crescimento, a fim de atender aos requisitos de listagem.…”

“…Pelo contrário, a maior parte do dinheiro do IPO é gasto em atividades baseadas em capitalização, como fusões e aquisições, para promover o valor de mercado da empresa após a abertura de capital. Essas empresas estão interessadas em aproveitar o IPO para alavancar suas dívidas a fim de arrecadar mais dinheiro, muito pouco é dedicado ao desempenho operacional (Gao, Long & Zhao, 2021). O que sugere que o desempenho econômico-financeiro pós-IPO da maioria das empresas diminui (Jin, Zheng, & Zhong, 2017;Kalil & Benedicto, 2018;Gao, Long & Zhao, 2021).…”

“…Essas empresas estão interessadas em aproveitar o IPO para alavancar suas dívidas a fim de arrecadar mais dinheiro, muito pouco é dedicado ao desempenho operacional (Gao, Long & Zhao, 2021). O que sugere que o desempenho econômico-financeiro pós-IPO da maioria das empresas diminui (Jin, Zheng, & Zhong, 2017;Kalil & Benedicto, 2018;Gao, Long & Zhao, 2021).…”

Does Venture Capital Reputation Contribute to Pre-IPO Performance of Entrepreneurial Firms in the Chinese Context?

“…Long and Zhang (2014) demonstrate that the Chinese IPO examination mechanism is associated with its institutional factors. In this Chinese institutional context, post-IPO operating performance decreases (Long et al, 2021), and IPO contributions to firm performance varies (Gao et al, 2021). Moreover, Chinese IPOs have the most profitable first-day returns in the global stock market, and Chinese VCs view an IPO as a saturation point for their returns, such that they are reluctant to hold their shares any longer (Que & Zhang, 2019).…”

“…Industrial orientation (IND) has been viewed as a critical variable by several pieces of literature (Brush et al, 1999; McNamara et al, 2005), which argues that industry orientation is positively associated with firm performance. Schmalensee (1985) suggests that industry effects determine firm profitability; moreover, Gao et al (2021) argue that IPO’s significance to operating performance varies on an industry-adjusted basis. IND is measured by its industrial price-earnings (PE) on average, given by the IPO assessment committee nominated by the CSRC.…”