Abstract
This study attempts to predict how long a newly listed corporation, usually termed initial public offering (IPO), will survive on the equity listing market. The three-fold contribution of this study comprises a hand-collected and substantially expanded dataset for listed IPOs (1990–2017) over a maximum tracking period of 31 years (1990–2020) to predict the IPO survival on emerging Malaysian capital market, the rationale and consequences for unifying the two listing boards (Main Board and Second Board) in 2009, and an investigation of the predictive role of ex ante strategic prospectus information as early warning signals for sustainable survival of Malaysian IPOs. We also make comparisons for the survival profile of IPOs listed on different listing equity boards. We use Cox proportional hazard (PH) model to estimate the empirical results because of the cohort research design of the study. Overall empirical results show that survival curves for IPOs listed on Main Board and Second Board were not statistically different. However, Second Board IPOs remained more vulnerable to hazard. The survival curves for IPOs listed on Main Market and ACE Market are statistically different. Empirical results reveal that high share premium, high listed capital, and longer firm age at listing date significantly increase the survival (reduce hazard) of IPOs listed on the Main Market and the Second Board. However, bigger firm size and elevated risk factors significantly reduce the survival (increase hazard) of the listed IPOs mentioned above. However, share premium is the only variable that has a negative and significant correlation with IPO survival on ACE Market. These results have implications for the regulators, prospective investors, and policymakers of emerging markets, where the IPO prospectus disclosures bridge the information asymmetry gap prevailing due to the nonexistence of public information prior to the IPO. Empirical findings of this study can be generalized to other developing and emerging markets where IPO prospectus substantially mitigates information asymmetry and ex ante strategic firm characteristics act as early warning signals in predicting IPO survival.
Highlights
Initial public offering (IPO) survival refers to the extent of time a public corporation remains listed on the stock market [1,2]
This study examines the survival of initial public offerings (IPOs) listed on different security listing boards, namely Main Market, Second Board, and ACE Market in the Malaysian equity capital market, Bursa Malaysia, over different horizons with an expanded dataset comprising 31 years
We examine the predictive role of ex ante firm strategic prospectus characteristics as early warning signals for the sustainable survival of Malaysian IPOs
Summary
Initial public offering (IPO) survival refers to the extent of time a public corporation remains listed on the stock market [1,2]. The IPO survival comes to an end as it delists from the respective stock market, irrespective of whether delisting occurs voluntarily (e.g., conversion to a private firm, merger and acquisition) [3,4] or involuntary (e.g., forced delisting by court or exchange, financial distress leading to liquidation, hostile merger and acquisition) grounds [5]. It has been observed that newly launched IPOs face survival challenges initially, and their sustainable viability has remained a debatable issue [7,8]. The newly listed firms face the risk of long-term survival due to takeover threats, financial distress, and forced delisting by the regulatory authority [4,9].
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