Post-IPO cash flow operating efficiency analysis of Borsa Istanbul firms

Abstract

Purpose- Companies can offer their shares to the public through the capital increase method, the sale of existing shareholders’ shares method or a mixed method where both are combined. The aim of the study is to examine the post-IPO performance of 78 selected companies that were offered to the public in Borsa Istanbul during the period of 2005-2018, according to the public offering method. In the study, the efficiency ratios of cash flows obtained from the operations related to sales, assets, equity and total liabilities were used as the operating performance measure. Methodology- The cash flow efficiency of the companies whose shares are publicly offered by using the capital increase method, the sale of existing shareholders’ shares method or the mixed method before the public offering and after the public offering was compared by using non-parametric tests. Findings Compared to the IPO year and the year before the IPO, companies that applied rights issue and mixed methods have shown significant improvements in post-IPO cash flow efficiency. It is observed that post-IPO cash flow efficiency ratios deteriorated significantly in the sale of existing shareholders’ shares method. Conclusion- Improvement in cash flow ratios of the companies that applied capital increase and mixed IPO methods, can be evaluated that after IPO these companies effectively manage their IPO money and contribute to their operating performance. On the other hand, the decreases in the cash flow efficiency ratios of the companies that applied existing share sale method, where any cash inflow does not occur, can be associated with the earnings management activities of these companies during IPO process. Keywords: IPOs, operating performance, financial efficiency, nonparametric tests JEL Codes: C14, G10, G11, G32