Initial and long-term performance of IPOs. Does growth opportunity of issuing firm matter?

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The performance of initial public offerings (IPOs) can be viewed at least into two different periods; initial aftermarket and long-term aftermarket. This study is initiated to examine the influence of of firms on initial aftermarket and long-term aftermarket performance. It is crucial to study on the influence of of firms in both periods as the investors, regardless of investment horizons, are looking for capital appreciation so that they can continuously secure good returns in the aftermarket. The are defined as the potential of issuing firms to positively survive in periods after their listing in stock market. The are measured by the allocation of received during the issuance of newly issued shares to activities which are expected to increase of a firm; e.g., spending on capital expenditure and asset acquisition. The information of growth opportunities of firms can be gathered from firm prospectus, particularly in the use of proceeds section. The of firms are proposed to serve as a signaling tool that transmits information on potential of firms to potential investors. This study proposes that higher amount of IPO allocated to and investment activities will attract higher numbers of potential investors to subscribe for the firms’ shares. A higher demand and subscription from investors will boost up price of the shares, thus lead to higher aftermarket returns. Employing 403 IPOs listed in Bursa Malaysia from January 2000 to December 2014, this study documents a positive significant relationship between and performance of IPOs in both periods: initial aftermarket and long-term aftermarket.