Intended use of IPO proceeds and initial returns

Ahmad‐Zaluki, Nurwati A.; Badru, Bazeet Olayemi

doi:10.1108/jfra-12-2019-0172

Cited by 14 publications

(26 citation statements)

References 101 publications

(200 reference statements)

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“…Similarly for a Malaysian sample, Ahmad-Zaluki and Badru (2020) found that IPO firms using their proceeds for growth and working capital had better initial performance than firms using their proceeds for debt repayment. When investigating using proceeds for growth specifically, Ahmad-Zaluki and Badru (2020) found that capital expenditures influenced IPO performance positively while R&D expenses negatively impacted performance. In another study, disclosing more uses of IPO proceeds did not have any significant relationship with IPO underpricing (Daily et al.…”

Section: Prospectus Information and Ipo Performancementioning

confidence: 86%

“…In a Malaysian sample, Rahman and Che-Yahya (2019) found that IPO firms that disclosed they would use their proceeds for growth were underpriced less than average and performed better three years after IPO, contrary to what Wyatt (2014) found. Similarly for a Malaysian sample, Ahmad-Zaluki and Badru (2020) found that IPO firms using their proceeds for growth and working capital had better initial performance than firms using their proceeds for debt repayment. When investigating using proceeds for growth specifically, Ahmad-Zaluki and Badru (2020) found that capital expenditures influenced IPO performance positively while R&D expenses negatively impacted performance.…”

Section: Prospectus Information and Ipo Performancementioning

confidence: 86%

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A configurational approach to the intended use of IPO proceeds and performance

Tupper

Mallon

2022

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PurposeThe authors seek an answer to the research question: how do the disclosure of the intended use of initial public offering (IPO) proceeds and firm characteristics jointly influence IPO performance?Design/methodology/approachData on the use of proceeds, firm age, size, high- or low-tech industry, and the length of the use of proceeds section were collected from 341 IPOs in the USA, UK, and Hong Kong. Fuzzy-set Qualitative Comparative Analysis was used to predict which configurations of IPO use of proceeds and firm characteristics consistently led to above-average IPO performance.FindingsTen configurations of causal factors were found to lead to above-average IPO performance. Disclosure of IPO proceeds use matters for IPO performance but is contingent on firm characteristics. Whether a firm is in a high- or low-technology industry along with its size and age have distinct effects on which intended uses of proceeds are beneficial and how long their intended proceeds section must be to lead to above-average IPO performance.Originality/valueThese findings contribute to a multidimensional view of IPO performance. The authors use information processing and a management perspective to see how the use of proceeds sections help frame an IPO’s equity story. The use of a configurational methodology and a management perspective shows how IPOs can be viewed as a bundle of attributes.

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Section: Prospectus Information and Ipo Performancementioning

confidence: 86%

Section: Prospectus Information and Ipo Performancementioning

confidence: 86%

A configurational approach to the intended use of IPO proceeds and performance

Tupper

Mallon

2022

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“…This study predicted that firms going public during a bullish market would be valued fairly. Finally, L_AGE is denoted as the natural logarithm of firm age (Ahmad-Zaluki and Badru, 2021). Established firms tend to be low-risk firms, as they are likely to report persistent earnings.…”

Section: Methodsmentioning

confidence: 99%

Does disclosure of earnings forecasts regulation affect the valuation of IPOs? Evidence from an emerging country

Ong

Mohd‐Rashid

Mehmood

et al. 2021

ARA

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PurposeThis paper aimed to explore the effect of a regulatory change pertaining to earnings forecasts disclosure from a mandatory to a voluntary regime on the valuation of Malaysian initial public offerings (IPOs).Design/methodology/approachThe study employed ordinary least square (OLS) regression and quantile regression to analyse the impact of disclosure of earnings forecasts regulation on the valuation of IPOs which comprised 458 IPOs reported for the period 2000–2017 on Bursa Malaysia.FindingsThis paper revealed that the regulatory change in forecasted earnings disclosure from a mandatory to a voluntary regime, effective from 1 February 2008, had a negative impact on the valuation of IPOs. The regime change did not improve the transparency of firms issuing IPOs. In fact, the absence of forecasted earnings information in most IPO prospectuses caused ex ante uncertainties to increase. Voluntary disclosure, however, had a significant positive relationship with the valuation of the IPOs issued during the global financial crisis period (2008–2010). Firms concealed their poor qualities by excluding forecasted earnings information from their prospectuses in order to have a fair valuation.Practical implicationsThe findings may be used by policymakers as guidance in improving the existing regulation regarding the disclosure of forecasted earnings.Originality/valueThis paper provides new insight on the effect of a regulatory change pertaining to earnings forecasts disclosure from a mandatory to a voluntary regime on the valuation of Malaysian IPOs. It also provides evidence that the regulatory change of earnings forecast disclosure affects the IPOs' values listed during the global financial crisis period.

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“…The underwriter reputation was measured as the percentage of the main underwriter market share divided by all underwriters’ total share subscriptions in a year. The existence of a reputable underwriter allowed IPO investors to have positive expectations of the long-term prospects of the issuing firm on the pre-market trading (Ahmad-Zaluki and Badru, 2020; Bayley et al , 2006; Neupane et al , 2017). Therefore, this study contended that the high underwriter reputation led to a greater shareholder commitment, an increase in investment horizons beyond the initial aftermarket and a reduction in the occurrence of flipping.…”

Section: Methodsmentioning

confidence: 99%

Do sponsors and democratic government influence the flipping activity of Pakistan IPO? Evidence from developing market

Anwar

Mohd‐Rashid

Yahya

et al. 2021

MRR

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Purpose This study aims to examine the impact of sponsors and democratic government on the flipping activity of initial public offerings (IPOs). Design/methodology/approach Based on the sample of 95 IPOs listed on the Pakistan Stock Exchange between January 2000 and December 2019, this study used multiple cross-sectional regression to examine the relationship between sponsors and democratic government on flipping activity. Findings The findings indicate a significant negative association between sponsors and the flipping activity of IPOs. Sponsor(s) signal quality by trying to share accurate information about company values. As a result, the confidence of rational investors in the company’s future prospectus increases and they hold their shares for future gains, which reduces the flipping activity. Also, democratic government, along with sponsors' participation, provides investors with liquidity immediately after listing. Practical limitations/implications The findings of this study have implications for investors as they may assist them make informed decisions about whether or not to invest in an IPO with high sponsor(s) ownership. In addition, issuers should consider the disclosure of sponsor information(s) as such information may directly affect the first day’s trading volumes. Originality/value To the best of the authors’ knowledge, this is the first research study that explores the correlation between sponsors and democratic government and flipping activity of IPO. This study is important for investors and issuers.

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Intended use of IPO proceeds and initial returns

Cited by 14 publications

References 101 publications

A configurational approach to the intended use of IPO proceeds and performance

A configurational approach to the intended use of IPO proceeds and performance

Does disclosure of earnings forecasts regulation affect the valuation of IPOs? Evidence from an emerging country

Do sponsors and democratic government influence the flipping activity of Pakistan IPO? Evidence from developing market

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