To List or Not to: Why Do Companies Deny Financing through Capital Market in Bangladesh?

Abstract

This study aims at figuring out the key reasons responsible for inhibiting companies to go for IPO. For the purpose, 100 privately listed companies situated in Dhaka had been approached and 15 companies responded. To substantiate the views of the companies, interviews from academician, merchant bank authorities, capital market journalist forum, and regulators were taken. In total, 25 Key Informant Interviews (KIIs) were conducted for the study. A focus group discussion (FGD) was arranged consisting 30 representatives from different merchant banks. To present the findings of the study, a thematic analysis approach was chosen where initial codes from the interviews and FGD were transformed and six key themes: macro-environment deterrent, institutional limitations, firm specific barriers, capital market deterrents, corporate governance code 2018, and money market deterrents were identified as the main factors of IPO avoidance by eligible companies. The study revealed that lack of coordination among relevant policy makers, few clauses of corporate governance code 2018, costly and lengthy IPO issuance process, insignificant tax gap, bank’s lenience towards loan defaulters, loan rescheduling facility of banks, lack of knowledge regarding capital market products, and compliance related issues are considered the most crucial reasons for IPO avoidance.