Initial Public Offerings Research Articles

Analysis of the Merger and Acquisition of PT GOTO (Gojek 0 Tokopedia) Tbk: Share Valuation and Firm Financial Performance

Mergers and acquisitions have become business practices to improve shareholder welfare. One of the newest phenomena in Indonesia is the merger of two large companies, namely Gojek, a transportation service provider, and Tokopedia, an e-commerce platform. This merger occured in 2021 with the official name PT GOTO Gojek – Tokopedia Tbk. When conducting an Initial Public Offering (IPO), the share price of PT GOTO Gojek – Tokopedia Tbk was set at Rp. 338 per share (CNBC, 2022). Many hopes were pinned on the share price, but the share price of PT GOTO Gojek – Tokopedia Tbk did not match expectations. In December 2023, based on the IDX website, the share price of PT GOTO Gojek – Tokopedia Tbk has dropped drastically to Rp. 95, experienced a decrease of Rp. 243 since IPO. This research shows whether the merger decision of the two companies has an effect on their intrinsic value as well as their liquidity ratio, activity ratio, solvability ratio and profitability ratios.

Can we rest easy under the registration-based IPO reform? Evidence from the Chinese growth enterprise market

The registration-based initial public offering (IPO) system is a pivotal initiative in China’s comprehensive capital market reform, but little is known about its effectiveness. Our study aims to explore the impact of the registration-based IPO reform on enterprises’ environmental, social, and governance (ESG) greenwashing behaviors. Drawing on data from 2,490 enterprises listed on the Chinese growth enterprise market and the main board of the Shenzhen Stock Exchange during 2012-2022, we find that the registration-based IPO reform significantly aggravates ESG greenwashing with an effect of 0.1696. Building upon this evidence, we explore the underlying mechanism. Peer competition and retail investor sentiment play a partial mediating role and become two channels through which the registration-based IPO reform may aggravate enterprises’ ESG greenwashing. Analysts’ attention can alleviate the impact of registration-based IPO reform on enterprises’ ESG greenwashing while management myopia intensifies it, and they both play a moderating role. Moreover, the aggravating effect of the registration-based IPO reform on ESG greenwashing is more pronounced in enterprises belonging to heavily polluting industries, in the Western region, and with low information transparency. Thus, our findings offer new insights into enterprises’ ESG greenwashing behaviors in the context of the registration-based IPO reform.

Beyond the First Day: A Path to Future Initial Public Offering Research Drawn from a Large-Scale

Beyond the First Day: A Path to Future Initial Public Offering Research Drawn from a Large-Scale

Investor Sentiment, Venture Capital, R&D Investment, and IPO Underpricing: An Empirical Analysis of Chinese Star Market

The Shanghai Science and Technology Innovation Board (STAR) led the Chinese capital market revolution with a registration system and showed a high Initial Public Offering (IPO) underpricing rate. This study investigates the impact of the research & development ratio, venture capital, and investor sentiment, on the IPO underpricing rate. The study utilizes STAR data from July 2019 to Dec 2022 listing 457 companies and employing the Ordinary Least Squares (OLS) model to conduct the analysis. The results indicate that venture capital and investor sentiment are positively related to IPO underpricing, while R&D investment negatively influences IPO underpricing. The examination of the determinants shaping IPO underpricing within the Chinese STAR market constitutes a valuable endeavor that facilitates a comprehensive and methodical comprehension of this specific facet of the capital market.

Determinates of investor opinion gap around IPOs: A machine learning approach

The current study examines the factors influencing investor opinions on issues related to listed firms during the first day of Initial Public Offerings (IPOs), focusing on a sample of 350 fixed-priced IPOs listed on the Malaysian stock exchange (Bursa Malaysia) from 2004 to 2021. This research contributes to existing literature by employing various machine learning methods, which address the limitations of traditional linear regression models commonly used in previous studies. Specifically, five methods—extra tree regressor (ETR), single feature selection (SFS), reverse single feature (RSF), recursive feature elimination (RFE), and sequential modelling feature adding (SMFA)—are utilized to assess the importance of features in predicting the investor opinion gap within the dataset.The study's experiments indicate that these methods effectively mitigate noisy data, enhancing their reliability for this type of analysis. The findings provide valuable insights for regulators regarding safeguarding investors' rights to information disclosed in prospectuses.

Analysis of the Reasons for Multiple Rounds of Inquiries of Newlife Company under the Registration System

The article will use Guangzhou Newlife New Material Co, Ltd., as the case study object after four rounds of inquiries. Through reading pertinent literature, compiling Guangzhou Newlife New Material Co, Ltd.,'s four rounds of inquiries letters and its reply information as well as the prospectus, and applying the AMPS model, the article will analyze the reasons for and the impacts of the enterprises' multiple rounds of inquiries. Under the Science and Innovation Board's registration system, some enterprises will be subject to multiple rounds of inquiries in their initial public offerings. The study's findings demonstrate that businesses must fully and completely disclose all relevant information and make sure that it is clear and simple in order to comply with the Science and Technology Board's (STB) audit process. Inquiry is helpful to alleviate information asymmetry and improve the pricing efficiency of initial public offering (IPO). Companies may improve their business plans and increase their competitiveness in the market by using many rounds of inquiry to gain a deeper understanding of their current state of affairs and prospective threats.

Different lies to different audiences: Tax avoidance versus earnings inflation

Using a proprietary dataset collected by the National Bureau of Statistics of the People's Republic of China (NBS), we are able to compare earnings reported to the NBS in the pre-IPO (initial public offerings) period with earnings for the same firm and the same year reported in firms' IPO prospectus. While Ball and Shivakumar (2008) find that in the U.K., financials reported at IPOs tend to be more conservative than the original reports, we find the opposite: income reported by Chinese firms in their IPO prospectus tend to be higher than those reported to the NBS. In the year immediately preceding the IPO, the discrepancy is mostly driven by firms inflating earnings in the IPO prospectus to increase issue prices. In earlier years, firms in provinces with weak law enforcement report lower earnings to the NBS to avoid taxes, which also contributes to the discrepancy between the IPO and NBS data. These findings suggest that firms tell different lies to different audiences. The discrepancy between the IPO and NBS earnings is positively correlated with the IPO issue price, indicating that firms are able to increase their IPO proceeds by raising earnings in the IPO prospectus from the original NBS reports. Furthermore, firms with the highest discrepancies experience the most significant declines in return on assets (ROA) and the most negative abnormal returns after the IPOs. Our paper complements the existent literature on earnings quality at IPOs, sheds light on firms' tax avoidance behaviors, and is of practical value to regulators.

Strategic choices in going public: ESG performance implications in China

AbstractChoices in going public are important business strategies that can influence Environmental, Social and Governance (ESG) performance through varying levels of regulatory scrutiny, investor expectations, governance improvements, public attention and strategic focus. We investigate the impact of listing approach on ESG performance in China over the period of 2009 to 2022, by comparing the ESG performance of firms going public via initial public offering (IPO) versus reverse merger (RM). Consistent with our institutional, legitimacy and averse‐selection hypotheses, we find that RM firms exhibit significantly lower ESG performance compared with IPO firms, a difference we attribute to the greater performance pressure, higher litigation risk, greater financing constraints and poorer internal controls experienced by RM firms. These factors likely reduce management's willingness to invest in and improve ESG outcomes. However, as time passed, the discrepancy in ESG performance between RM firms and IPO firms gradually diminished. Additionally, the nature of state ownership and reduced competitive pressure in the industry also serve to mitigate the negative impact of RMs on firms' ESG performance. To promote sustainable development, going public via IPO offers a better business strategy, creating shared value among a broader range of stakeholders, including socially responsible investors, advocacy groups and regulators.

Tinjauan Yuridis dalam Pasar Modal: Analisis Tahapan Initial Public Offering (Ipo)

In today's competitive business era, entrepreneurs are faced with the challenge of growing their businesses in an increasingly competitive environment. One of the main strategies for growth is business expansion, which often requires additional funding. Internal funding is often insufficient, so many companies turn to external sources of funds, such as through an Initial Public Offering (IPO). IPOs are defined in Law No. 8/1995 on Capital Markets and offer various benefits, including increased share ownership by individual investors, expansion of product distribution, and long-term investor support. However, some listed companies choose not to list their shares on the Indonesia Stock Exchange, a decision that complies with the Capital Market Law. A company can be classified as a public company if it meets certain criteria, including the number of shareholders and minimum paid-up capital. While not listing on the stock exchange may have its own benefits and drawbacks, this decision has significant implications for the company's operations. This study explains the dynamics and implications of various funding strategies in the current business context, providing insights into the IPO decision and the choice not to list on the stock exchange.

Price deregulation and investors’ IPO speculation: Evidence from Chinese registration system reform

This study assesses the impact of market-oriented reforms of the Chinese initial public offering (IPO) system on investor speculation. The empirical results reveal that the registration-based IPO system reform expedites the release of investor sentiment and curbs speculation in the post-IPO period. The registration reform in the Sci-Tech Innovation Board (STAR market) is more effective than that in the Growth Enterprise Market (GEM), and the long-term effects surpass the short-term effects. Further tests indicate that greater institutional (individual) investor participation is the reason for higher (lower) reform efficiency; as investor sentiment increases, the dampening effect of the registration system reform on speculation decreases. Our study confirms the importance of market-oriented reform and provides implications for implementing efficient reforms in emerging markets with high levels of manipulation and speculation.

Mamaearth IPO: the pricing dilemma of a startup

Learning outcomes After working through the case and assignment questions, students will be able to recognize essential considerations for the initial public offerings (IPO) decision, compare different types of fundraising options for startups, evaluate the free pricing regime for IPO pricing, examine the pricing process of IPOs, explore the issue of valuation of IPOs and assess the decision choices of the founder regarding IPO given the trade-offs and market conditions. Case overview/synopsis The case study explores the dilemma of Ghazal Alagh, the co-founder and chief innovation officer of Mamaearth, a direct-to-consumer babycare and skincare unicorn, regarding its IPO decision. Mamaearth had filed the draft offer document with SEBI in December 2022, and Ghazal was busy engaging with the investment bankers for the upcoming IPO. However, the weak market sentiments and shelving of IPO plans by many startups were forcing her to think about facing the possibility of postponing the IPO or continuing the IPO process but at lower valuations. The case study provides an opportunity to explore a startup’s financing choices. It allows for discussion of various IPO challenges from the perspectives of founders, venture investors, regulators, investment bankers and new IPO investors. Complexity academic level This case study is best suited for senior undergraduate- and graduate-level business school students in courses focusing on entrepreneurship, corporate finance, financial management, strategic management and investment banking. Subject code CSS1: Accounting and finance. Supplementary materials Teaching notes are available for educators only.

Analyzing and Explaining the Forecasting Bias that Occurred on Initial Public Offerings that Took Place in Brazil

Analyzing and Explaining the Forecasting Bias that Occurred on Initial Public Offerings that Took Place in Brazil

Time-varying default risk of Chinese-listed companies: From empirical test to theoretical conjecture

Default risk is one of the major challenges faced by the financial industry. This paper aims to investigate the dynamic of enterprise debt default risk law after Initial Public Offerings (IPO). The paper also proposes a theoretical conjecture to explain the logic of the time-varying law. To achieve this objective, the paper used panel data of non-financial enterprises in Shanghai and Shenzhen A-share markets from 2002 to 2020. We found that the debt default risk and IPO have an inverted U-shape relationship, the inflection point is at 8 years of IPO. Moreover, adding control variables and changing measurement indicators did not change the time-varying law. The theoretical conjecture showed that the default risk is low at the initial stage of IPO. Furthermore, over-investment of managers triggers IPO exuberance, and with the recognition of the credit market, can lead to an increase in the debt level of the enterprises and default risk. However, with time, default risk will decrease as the business behavior is adjusted and impulsive investment is reduced. Therefore, the debt default risk of listed companies presents a significant and robust “inverted U” characteristic over time.

DETERMINANTS OF THE LONG-TERM PERFORMANCE OF MALAYSIAN INITIAL PUBLIC OFFERINGS

This study examined the determinants of the long-term performance of 351 initial public offerings (IPOs) launched in Malaysia overthe 2002–2010 period. This paper used a panel regression analysis framework based on the ordinary least squares (OLS) technique toexamine the potential determinants of IPOs’ long-term performance. The findings revealed that the volatility of aftermarket returns, the dummy ACE market and concentration ownership significantly influence the long-term performance of Malaysian IPOs. This paperoffers important implications specifically for investors as the findings can help them understand more about public companies’ long-term performance and how to better predict their performance.

IPO Pricing Theory and Mechanism under the Registration System

When a firm makes an initial public offering (IPO) and qualifies for listing, it negotiates and determines a price with its underwriters for the public sale of its shares to specific or non-specific investors. This paper elaborates the theory of IPO price suppression through literature review and analysis, and also summarizes the IPO pricing mechanism. It helps to provide guidelines for the study of IPO pricing in China under the registration system environment and assists the regulators to further improve the relevant regulations.

The Comparative Analysis of The Financial Performance of PT Pertamina Geothermal Energy Tbk Before and After Initial Public Offering

This study aims to compare PT Pertamina Geothermal Energy Tbk (PGEO) financial performance in conditions before and after the Initial Public Offering (IPO). The method used in this study is a descriptive research method with a quantitative approach, using secondary data, namely the Corporate Financial Report 2020-2023. Measuring a company's financial performance uses the liquidity ratio, activity ratio, solvency ratio, and profitability ratio. The results of the study indicate that the company's performance tends to be better after the IPO compared to the performance before the IPO, both in terms of liquidity, activity, solvency, and profitability.

Driving Venture Capital Interest: The Influence of the Big 4 Audit Firms on IPOs

This paper investigated how hiring one of the Big 4 auditing firms helps initial public offering (IPO) owners attract venture capitalists’ (VCs) backing when going public to address the gap in auditing and venture capital literature. For this, the paper examined a large dataset from 1995 to 2019 consisting of 33,536 IPO firms from 22 countries with diverse socioeconomic, political, and cultural contexts. The study found that hiring Big 4 auditors increases IPO owners’ chances of recruiting VCs by up to 50%. The analysis also supports prior findings, which state that IPO owners strategically choose Big 4 audit firms to lower agency costs and send quality signals to improve openness and disclosure as well as boost VCs’ confidence in the IPO market. This research offers multiple benefits to academics, policymakers, investors, and issuers.

Government Subsidies and IPO Firms’ Short-Term Excess Returns: Evidence from China

AbstractAs an important tool for local governments to intervene in the listing process in their jurisdiction, the implementation effect of government subsidy has been quite controversial. This study examines the pricing mechanism of Initial Public Offerings (IPO) within China’s macro institutional environment. The period from April 2012 to December 2015 was selected as the sample observation period, with companies listed on Growth Enterprise Market (GEM) as the study objects. By focusing on IPO firms’ short-term excess returns, the multiple linear regression model and propensity score matching method (PSM) were applied to evaluate the actual impact of local government intervention through financial subsidies during the listing process. The results show that government subsidies improve IPO firm’s short-term excess returns. This promotion effect is more significant in state-owned enterprises rather than in private enterprises. Moreover, the implicit window guidance weakens the promotion effect of government subsidies on the short-term excess returns. Further, the more government subsidies the IPO firms receive, the worse their long-term performance will be. The findings demonstrate that local governments employ financial subsidies to expedite the listing process within their jurisdiction, thereby facilitating IPO companies in generating short-term excessive returns while simultaneously impeding the normal production and operation. The conclusion enhances theoretical understanding regarding high underpricing, while also offering investors a novel approach to interpreting government subsidy information and assessing IPO firm’s earnings sustainability.

Twenty years, twenty studies: what can we learn from San Diego’s innovation ecosystem?

ABSTRACT This study conducts a systematic literature review of San Diego’s innovation ecosystem to analyse its evolution, dynamics, the most influential (key) stakeholders, and success factors. 1,405 documents from Scopus and 809 documents from Web of Science (WoS) were retrieved and analysed to obtain a final sample of twenty articles. The ecosystem’s key organisational stakeholders were identified as UC San Diego, research institutes, venture capitalists, pioneer and leading companies and intermediary organisations. Regarding success factors, key political factors include research funding, other public funding and policies that foster, for example, the actors’ geographical proximity. Key economic factors include start-up support systems, company acquisitions and initial public offerings (IPOs). Several vital social factors, such as collaboration, social networks and risk-taking culture, were also identified. Finally, the key technological success factors include technology transfer, specific focus areas and critical mass in research and development. This systematic review, complemented by expert interviews, provides a comprehensive view and validation of the stakeholders and factors that have contributed to the emergence, evolution and dynamics of the innovation ecosystem. The study also exemplifies an originally nonleading city’s path to success, which can provide valuable innovation policy and planning insights for other nonleading regions.

CEO characteristics and R&D expenditure of IPOs in China

In the rapidly evolving landscape of Mainland China's stock market, there is a substantial correlation between the research and development (R&D) spending of companies that are going through initial public offerings (IPOs) and the characteristics of the CEO. This study aims to investigate how CEO traits influence the allocation of resources towards R&D activities within the context of IPOs in Mainland China. The CEO plays a pivotal role in shaping the strategic direction and innovation agenda of companies, especially during the IPO process where firms seek to raise capital and expand their operations. Policymakers must comprehend the influence of CEO attributes on research and development spending, investors, and managers seeking to foster innovation and sustainable growth in Mainland Chinese firms. This research will focus on analyzing CEO traits such as educational background, prior experience, age, tenure, risk aversion, and management style, and their influence on the decision-making process regarding R&D investment. This study intends to determine significant links between R&D expenditure and characteristics of CEOs by looking at a sample of IPOs in the stock market of Mainland China. The analysis takes into account many factors like industry competition, market dynamics, regulatory environment, and firm-specific traits. Data on CEO traits, company finances, and R&D spending will be analysed using quantitative techniques like regression analysis and event research procedures. Furthermore, qualitative research techniques like case studies and interviews will offer deeper understandings of the contextual elements influencing the IPO market in Mainland China as well as the mechanisms underpinning these linkages. All things considered, this study will advance knowledge of how CEO traits affect R&D spending in the particular setting of initial public offerings (IPOs) on the stock market of Mainland China. The findings will offer valuable insights for policymakers, investors, and managers navigating the complexities of fostering innovation and sustainable growth in Mainland Chinese firms undergoing IPOs.