Initial Public Offering Companies Research Articles

The impact of risk factor disclosure on the initial return of IPO companies amidst a pandemic

The capital market has increasingly become a pivotal avenue for enterprises seeking additional capital for expansion or operational enhancements. In raising funds through an Initial Public Offering (IPO), the company must publish its risk disclosure in the prospectus. Therefore, this study aims to investigate the impact of risk disclosure on the initial return of Indonesian companies undergoing IPOs during the pandemic. Using data from 136 out of 164 companies that went public between 2020 and 2022, sourced from the Indonesian Stock Exchange and company websites, the study employs the ordinary least squares method to estimate the impact of risk disclosures on initial returns during the pandemic. The findings reveal that external and overall risk disclosures significantly influence IPO initial returns. Specifically, Indonesian investors were particularly attentive to external and overall risks when evaluating IPOs during the pandemic. This heightened concern suggests that comprehensive risk disclosure can affect investor behavior and financial outcomes for companies going public in uncertain times, highlighting the importance of transparency in risk communication to support investor decision-making and market stability.

Media Sentiment and Its Role in Shaping IPO Performance

The media performs an essential role in providing information regarding initial public offerings (IPOs) to investors. Often, public information about IPO companies is scarce and investors find it difficult to comprehend complex documents, making media a cost-effective and authentic source of information. This study explores how media sentiment affects the underpricing and initial aftermarket performance of IPOs using 3,124 media articles published from April 2019 to March 2022. In doing so, the authors employed textual sentiment analysis using the Loughran and McDonald dictionary to deduce the media net sentiment score. Subsequently, robust regression is conducted by incorporating the media sentiment, the volume of media articles, and other control variables. The result mentions that the way media present information has the potential to influence the decision of retail investors. The net sentiment score shows that the positive information in the media article makes investors optimistic about the prospects of the business. It boosts their confidence and creates more demand for shares, thereby increasing the IPO’s first-day market-adjusted abnormal return. Further, it has been discovered that media sentiment significantly influences initial aftermarket performance primarily due to the limited trading history available for the IPO company during the initial stage.

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.

Can the Presence of Big 4 Auditors in IPO Prospectus Reduce Failure Risk?

This paper addresses a void in the research on auditing and initial public offering (IPO) failure by investigating the impact of the Big 4 auditing firms on the likelihood of an IPO failure. This research is the first comprehensive analysis of more than 33,000 global IPOs that either failed or were successful between 1995 and 2019 across a wide range of nations with vastly different regulatory, cultural, and economic settings. A cross-sectional probit regression model is utilized to investigate the influence of hiring the Big 4 auditing firms on IPO failure, building upon prior studies on IPO failure. We found strong evidence that IPO failure rates were diminished by up to 67% when one of the Big 4 auditing firms was involved in auditing the IPO prospectus. For IPO founders, hiring Big 4 auditors before an IPO is a quality signaling strategy that minimizes the risk of a failed IPO by reducing information asymmetry among IPO participants. Our findings provide useful policy implications. Hiring one of the Big 4 auditing firms before an IPO is a reassuring signaling strategy for founders, since it decreases information asymmetry among IPO investors and so lowers the risk of the IPO failing. Primary market investors now have access to credible evidence indicating that backing IPOs from companies that use the Big 4 auditing firms increases the likelihood of such IPOs being listed on stock exchanges and yields positive returns. This is the first time, as far as the academicians are aware, that conclusive evidence has been found of a strong inverse association between the presence of Big 4 audits and failure risk for IPO firms. Our research could be helpful to primary market regulators since it shows how crucial it is to encourage Big 4 audits in IPO companies. The quality work of the Big 4 auditors does lower the risk of failure in the IPO market, which might help owners of small private equities to list their firms on the IPO market, boosting economic growth.

An Analysis of the Development of Investment Banks' IPO Business under the Registered System

Under the reformed registration system, the role of investment banks in the Initial Public Offering (IPO) business has evolved significantly from the approval system. As crucial "gatekeepers" of the capital market, these banks now bear the responsibility of thoroughly examining issuance application materials for truthfulness, accuracy, and completeness. While the IPO business promises a prosperous future for investment banks, it also presents considerable challenges. Some banks face issues such as insufficient adherence to prudent examination requirements, lax establishment or implementation of internal control systems, and the need for improved information management. To enhance their sponsorship business, it is recommended that investment banks optimize talent training, internal management control, risk management, and intelligent information system construction. Cultivating professional sponsorship talents with comprehensive skills, reinforcing ethical standards, and conducting thorough reviews of IPO companies are crucial. Furthermore, optimizing the management system, establishing effective communication mechanisms, and enhancing risk management capabilities are essential steps. Leveraging advancements in computer technology, the construction of a secure and reliable intelligent information system is advised. As the reform progresses, investment banks should bolster international exchanges, cooperation, and professional competitiveness to evolve into reputable international brand banks.

Investors’ demand in Initial Public Offering (IPO): Shariah compliance, corporate governance and macroeconomic factors

Purpose Initial Public Offering (IPO) is a major milestone for a company. It allows a private company to issue shares to a much broader group of investors and become public. But conclusive evidence of the driving forces behind investors’ demand is yet to be identified. Therefore, the major purpose of this study is to assess the level of investors’ demand in IPO and how investors’ demand in IPOs is affected. Design/methodology/approach The study will employ 80 IPO companies of a Muslim-majority country, Bangladesh, starting from 2013 to 2021 with application of linear and quantile regressions. Apart from that, t-test will be used to compare means of groups of Shariah-compliant and non-Shariah-compliant firms and IPOs under fixed-price and book-building mechanism. Findings Oversubscription is higher for IPOs issued through fixed-price method compared to book-building method, but no significant difference is found in oversubscription for Shariah firms compared to non-Shariah firms based on t-tests. The authors found IPO size, firm size, IPO risk, proportion of shares offered to public, and bank interest rate to have significant impact on the IPO demand. Some models found non-Shariah compliance status of IPO companies to be a significant factor for the investors to demand IPO. Quantile regression results found board independence to have a positive association with larger, less-subscribed firms and board size to have a negative relation with IPO demand, for smaller firms with high demand. Research limitations/implications Future studies may apply the findings to other settings, especially into the reasons behind preference for non-Shariah-compliant firms and higher demand for IPOs during higher interest rate. Equity issuing firms and issue managers can benefit from this study by wisely deciding on the proportion of shares for public, issue size and board of director composition. Shariah considerations cannot be ignored given that more information on Shariah compliance is disseminated among investors despite current non-preference for Shariah-compliant IPOs. On the other hand, institutional investors and general investors should consider firm-specific, governance and macroeconomic factors in IPO investment. Likewise, regulators would do well to bring in quality IPOs with characteristics mentioned in this study for ensuring stability of the market. Originality/value The main contribution of the study is identifying determinants of IPO demand: faith, governance, macro issues – understanding whether one or many of the above factors drive investor demand in IPOs of a Muslim-majority country will be the main contribution.

ANALYSIS OF SHARE PRICES OF NYKAA AND PAYTM AFTER THEIR IPO

The Initial Public Offering (IPO) market is a turning point for many businesses as they seek to grow their business, raise capital, and attract public investment. Going public is a huge deal for every party concerned, from the firm itself to the investors who stand to gain from its growth in the future. Investors, experts, and the general public have been captivated by the initial public offerings (IPOs) of two prominent startups in recent years—Nykaa and Paytm. Nykaa, an e-commerce website based in India, made its stock market debut in November 2021. Things related to personal hygiene and cosmetics are the platform's forte. Nykaa, founded in 2012 by Falguni Nayar, a former investment banker, is currently a major player in the booming cosmetics industry in India. An increase in interest in the company's IPO was driven by the growing demand for cosmetics and the allure of online shopping in India's market. Also in November 2021, India's leading digital payment and financial services platform, Paytm, went public for the first time. When Vijay Shekhar Sharma launched his mobile payment system Paytm in 2010, it revolutionised the way Indians handled their money and made online transactions. The IPO marked a watershed moment in the development of digital payment systems and financial technology, both of which have the potential to radically alter the Indian economy. Investor mood, underlying prospects, and market expectations are all gauged by the share prices of Nykaa and Paytm, which have been the topic of extensive investigation and study since their initial public offerings (IPOs). To understand the factors driving these stocks' performance, it's important to look at more than just financial results; you need to look at industry trends, market sentiment, and company advancements as well. This study aims to examine the performance of Nykaa and Paytm since their IPOs, the factors that have influenced their share prices, and the potential future directions of these companies. Our goal is to help investors make sense of the volatile stock market by studying key indicators, market dynamics, and industry trends. The intricacies of investing in these renowned organisations can be better grasped with this information. After that, we'll take a look at the stock prices of Nykaa and Paytm since their IPOs, analyse the factors that have impacted them, and then draw some conclusions about what this means for investors who are trying to make money off of these companies' fast development. In this article, we will provide a comprehensive overview of Nykaa and Paytm's post-IPO process and use quantitative research, qualitative insights, and industry experience to shed light on the benefits and drawbacks of investing in these companies. The initial public offerings (IPOs) of Nykaa and Paytm have wowed investors and industry participants, proving that technology and innovation can propel value creation. As these businesses make their way as publicly traded corporations, share prices will continue to reflect the interplay between basic considerations, market sentiment, and broader economic trends. Investors can benefit from the ever-changing stock market and make informed decisions by closely monitoring their performance following an initial public offering (IPO).

Post‐IPO lead venture capital firm involvement, merger‐related litigation and target firm valuation

AbstractVenture capital firms (VCs) provide certification and monitoring services to the initial public offering (IPO) companies they finance, as has been well documented in the academic literature. Yet, there are few studies that explore what role – if any – VCs play when an IPO company is subsequently acquired, particularly if that acquisition is legally contested. Using a sample of 721 merger and acquisition (M&A) offers for US VC‐backed IPO companies, announced between 1996 and 2018, we find that a takeover bid that occurs in the presence of the lead VC commands a higher target firm valuation and is less likely to be legally contested than a bid for a company from which the lead VC has already exited. In addition, companies in which the lead VC is present enjoy higher stock‐price returns in response to M&A announcements. Our results provide new evidence regarding VC certification and monitoring – including its role as a litigation deterrent – long after the IPO.

Do Initial Public Offering Strategies Improve Firm's Performance? Evidence from Emerging Country

The firm’s decision to become a public firm is very interesting to analyze and reveal its performance. This study aims to reveal the firm’s performance in the short and medium term after conducting an initial public offering (IPO). In addition, the choice of the IPO strategy, that are share-only IPO (SIPO) or package IPO (PIPO) also affects the firm’s performance. Annual reports of up to 3 years of 155 companies conducting IPOs from 2010 to 2016 are used to examine the short-term and medium-term impacts of the IPO process. A very surprising result of this study is that IPO companies cannot show better performance in the short and medium term after the IPO, including State-Owned Enterprises (SOE), it gets worse if the company decides to use PIPO as a strategy during the IPO.
 Keywords: initial public offering, firm performance, share-only IPO, package IPO

From disclosure to sustainable performance: how corporate social responsibility disclosure impacts the long-term share price performance of Malaysian IPO

PurposeThis paper examines the relationship between the extent and quality of the four dimensions of corporate social responsibility disclosure (CSRD) namely community, environment, workplace and marketplace with the long-run share price performance of Malaysian initial public offering (IPO) companies.Design/methodology/approachThis study utilised secondary data by the content analysis of the annual reports and Datastream of 115 IPOs listed from 2007 to 2015 in Malaysia. The IPO’s performance was determined by calculating the return measures under the equally weighted and value-weighted schemes of the mean abnormal returns and buy-and-hold abnormal returns covering the three years post-listing using the event-time approach.FindingsThe findings demonstrate that Malaysian IPOs experience substantial overperformance and underperformance when both the IPO performance measures are benchmarked against the matched companies and market. The results indicated that the extent and quality of the community and environment CSRD dimensions are positively and significantly correlated to the IPO’s performance. On the other hand, the extent and quality of the workplace and marketplace CSRD dimensions are negatively and significantly correlated to the IPO performance.Practical implicationsMalaysian regulators could benefit from these findings in their endeavour to carry out a reform process on CSRD to improve its quality. The results of this study are important to investors, regulators, non-government organisations, communities and policymakers. They also enhance the understanding of companies about the importance of disclosing greater CSR information to improve their performance and profitability.Originality/valueTo the researchers' best knowledge, this study provides new insights into the association between CSRD and the performance of Malaysian IPO companies, which is considered important.

The influence of profitability, offering size, firm size, financial leverage and sharia complaint status on initial return in IPO companies at the Indonesia stock exchange


 
 
 
 This study aims to determine the effect of profitability, offering size, firm size, financial leverage and sharia compliant status on the initial return of IPO companies listed on the Indonesian stock exchange in 2018-2021. The population in this study are companies that carry out initial public offerings (IPO) there are 217 companies listed on the Indonesian stock exchange in 2018-2021. The research sample consisted of 76 companies with the sampling technique using purposive sampling . The data analysis technique used to test the hypothesis is multiple linear regression using SPSS version 26.
 
 
 

THE EFFECT OF FIRM CHARACTERISTICS ON THE UNDERPRICING OF IPO STOCK

Initial Public Offerings (IPOs) represent a critical mechanism for companies to raise capital by offering their shares to the public for the first time. This study investigates the determinants of stock underpricing in IPO companies listed on the Indonesia Stock Exchange between 2019 and 2022. Specifically, we examine the impact of return on equity (ROE), firm size, firm age, and reputation in terms of Knowledge, Attitude, and Practice (KAP) on stock underpricing. The sample selection process employs a saturated sample methodology, resulting in a final observation-worthy sample of 134 companies from an initial pool of 219. We employ multiple regression analysis using the SPSS 27 program to analyze the data. Our findings reveal that while firm size, age, and KAP reputation do not significantly influence stock underpricing, return on equity emerges as a significant determinant affecting the degree of stock underpricing in IPOs. This research contributes to a better understanding of the dynamics at play in the IPO market, providing valuable insights for investors, policymakers, and market participants.

Does CEO celebrity affect IPO underpricing? Evidence from the strategic emerging industries in China

PurposeThe interaction between evaluators is underestimated in legitimacy literature. This study aims to examine the impact of CEO celebrity on initial public offerings (IPOs) underpricing in Strategic Emerging Industries (SEIs). Based on legitimacy and limited attention effect, this study introduces a new antecedent to the asset pricing literature under a particular sample.Design/methodology/approachThis paper illustrates how CEO celebrity promotes IPO underpricing by enhancing the legitimacy and then explores how the CEO characteristics can moderate this relationship. Using 1,128 IPO companies in China SEIs from 2010 to 2019, cross-section data is used to build a multiple linear regression model to test the hypotheses.FindingsThe result indicates that CEO celebrity is positively related to IPO underpricing. Founder CEO and CEO duality amplify the relationship. Further analysis shows that the relationship between CEO celebrity and IPO underpricing is more pronounced in firms with high Baidu search and low market sentiment.Originality/valueThis study provides insights into how CEO celebrity as notable internal information shapes the formation of investors' preliminary impressions of firms. The evidence consists of legitimacy and limited attention perspective by showing how investors favor, follow and hype the stocks with celebrity CEOs. The results extend the knowledge about how CEO characteristics influence information frictions in asset pricing during IPO.

Analysis of Underpricing Levels in Initial Public Offering Companies on the Indonesia Stock Exchange

If a company wants to go public, it will conduct an Initial Public Offering (IPO) first. The share price at the time of the IPO is predetermined by agreement from issuers and underwriters while when in the secondary market the share price is determined by a market mechanism for the demand and supply that occurs in the market. During an IPO the phenomenon of Underpricing can occur. Because Underpricing is a condition when the stock price in the primary market is lower than in the secondary market. This study aims to determine the effect of Financial Leverage, Market Conditions, Share Offering Percentage, and earnings per share on underpricing. The population used in this study is companies that IPO on the IDX for the 2017-2021 period, namely 247 companies listed. Sample determination uses a purposive sampling technique and there are 20 samples that match these criteria. The results of this study show that partially Financial Leverage, Market Conditions, and earnings per share affect Underpricing while Share Offering Percentage has no effect on Underpricing. Simultaneously, Financial Leverage, Market Condition, Share Offering Percentage, and earnings per share affect Underpricing.s.

Pengaruh ROE, EPS, dan Reputasi Underwriter terhadap Tingkat Underpricing Stock pada Perusahaan IPO di ISSI


 
 
 
 Companies need additional capital, one of which is from external companies by conducting initial public offerings on the capital market, but companies often experience underpricing in the secondary market. This study aims to develop findings regarding the phenomenon of underpricing in IPO companies and to determine the effect of return on equity (ROE), earnings per share (EPS), and underwriter's reputation on the level of underpricing. The population in this study are companies that have conducted an Initial Public Offering (IPO) that are registered on the Indonesian Sharia Stock Index (ISSI) and are not delisted on the Sharia Securities List (DES) in the period 2019 to 2022. The research sample was taken using a purposive sampling method to obtain a sample of 104 companies. Data analysis used multiple linear regression analysis with the SPSS 22 program. The results found that the average level of underpricing was 31,19%. Simultaneously the variables ROE, EPS, and underwriter's reputation have a significant effect on the level of underpricing. While partially, it shows that ROE has a negative and significant effect on the level of underpricing, the reputation of underwriters has a positive and significant effect on the level of underpricing, and earnings per share does not affect the level of underpricing.
 Keywords: Underpricing, Initial Public Offering, Return on Equity (ROE), Earning per Share (EPS), Reputasi Underwriter
 
 
 

Intellectual Capital on Initial Return: Evidence in Initial Public Offering Companies

Intellectual Capital on Initial Return: Evidence in Initial Public Offering Companies

Fear of the COVID-19 pandemic and IPO aftermarket liquidity in ASEAN-5

PurposeThis study aims to examine the relationship between the fear index and initial public offering (IPO) aftermarket liquidity in ASEAN during the bearish time, the COVID-19 pandemic.Design/methodology/approachThis study uses random effect panel regression analysis using two proxies of IPO aftermarket liquidity, namely, volume and turnover, on data of 90 IPO companies in the ASEAN-5 countries over four study periods: 30, 60, 90 and 100 days, after their IPOs.FindingsThe results indicate that the COVID-19 fear index significantly affects liquidity for all periods. The fear index decreases the stock aftermarket liquidity of ASEAN-5 IPO companies. The findings are consistent with additional tests.Originality/valueThis study initiates research during the COVID-19 pandemic in ASEAN-5 countries. Furthermore, while the other studies examine the stock performance of existing listed companies, this study focuses exclusively on the liquidity of companies that went public through IPOs in 2020.

Community and environment disclosures and IPO long-run share price performance

Purpose This paper aims to examine the relationship between the community and environment disclosures and the long-run share price performance of Malaysian initial public offering (IPO) companies. Design/methodology/approach This study used secondary data through the content analysis of the annual reports and DataStream of 115 sampled IPOs listed on Bursa Malaysia from 2007 to 2015. The present study incorporated weighted least squares and quantile least squares to evaluate the relationship between the community and environment disclosures and IPO performance. Findings The results show a positive and significant relationship between the extent and quality of community disclosures and IPO performance; while the extent and quality of environment disclosures have a negative and positive relationship, respectively, with IPO performance. These results suggest that community and environmental activities can be considered an effort to enhance Malaysian IPOs. Practical implications These results suggest that Malaysian IPO companies should be involved consistently in corporate social responsibility disclosure, i.e. community and environmental activities, as they have a significant impact on the performance of Malaysian IPOs. The findings can facilitate financial institutions and regulatory agencies in driving companies to be more responsible regarding community and environmental disclosures. Originality/value To the best of the authors’ knowledge, this study provides new insights into the relationship between the community and environment disclosures and the performance of Malaysian IPO companies.

EXPLORING UNDER PRICING OF SELECT NSE-LISTED IPOs IN INDIA WITH RESPECT TO DIFFERENT MACRO-ECONOMIC SECTORS

Initial Public Offerings (IPOs) are subscribed by the interested investors at the offer price or issue price. Eventually, under-pricing or over pricing is seen after listing of securities and many factors influence the price performance of IPOs. In this backdrop, the current study analyses the first day price performance of IPOs on the basis of the various macro-economic sectors of the NSE. The study explores the various measures of first day returns on the basis of the different categories of the NSE-based sectors of the sample IPOs companies.

The Vanishing Role of IFRS Application on the Performance of Saudi Arabian IPO Companies

This research investigates the long-term impact of the International Financial Reporting Standards (IFRS) regulation on the performance of Initial Public Offering (IPO) corporations in developing market nations. The research employs 124 IPO companies listed in Saudi Arabia from 2003 to 2019 using Difference-in-Differences (DiD) estimation. It was discovered that enforcing the use of IFRS provides no role on the performance of IPO companies in the long-run. On the secondary market, where there was low information asymmetry, the IFRS did not enhance the aftermarket performance of IPO corporations. The success of the IFRS in creating high-quality financial reporting is dependent on the level of information asymmetry and disappears when analysts and investors have access to an abundance of information about traded enterprises, especially in emerging IPO markets like Saudi Arabia.