Firm-Specific Determinants and Outcomes of Initial Public Offerings in Thailand, 2001–2007

Abstract

This paper examines the firm-specific determinants and outcomes of initial public offerings (IPOs) in Thailand using data on 5,228 private and newly publicly listed firms between 2001 and 2007. We use the listing requirements of the Stock Exchange of Thailand (SET) to identify all private firms compulsorily registered with the Department of Business Development, Thai Ministry of Commerce that are potential IPOs. Analysis of the determinants of IPOs reveals that firms that are younger, larger, more leveraged and with lower interest rates from borrowing are more likely to list. Analysis of post-IPO performance suggests that Thai firms going public succeed in lowering their borrowing rates, and that unlike comparable findings elsewhere, profitability does not decline after listing. However, despite these findings, the rate of listing in Thailand remains relatively low, and the paper hypothesises that relatively high listing costs and the availability of alternative cheaper debt financing sources, the large shares of foreign subsidiary and small and medium-sized business operating in Thailand, along with market and political instability and cultural factors act against Thai IPOs.