Initial Public Offerings Research Articles

Cross-influence of Risk, Return, and Governance on Decision-Making in Hydropower Investments

The sustainable growth of an economy pivots on a robust financial system, particularly in the context of capital availability. This study analyzes the behavior of investors towards initial public offerings (IPOs), focusing on the hydropower development sector in Nepal. The research explores the multifaceted relationship between factors such as risk, return, and governance on investor behavior, considering elements like Idiosyncratic risk (IR), timing of issue (TIPO), Bandwagon effect (BE), expected return (ER), sectoral performance (SP), corporate governance (CG), pre-issue financial health (PFH), and marketability (MKT). Additionally, sociodemographic variables and their connection to investor behavior are examined. Employing a descriptive research design, the study involves a sample size of 392 individuals, selected through a convenient sampling method. The study's main finding documented that idiosyncratic risks, expected returns, and corporate governance stand out as crucial factors influencing investment decisions (P < 0.05). Notably, the regression analysis indicated the absence of a significant impact from market risks (P > 0.05), including the bandwagon effect and IPO timing, on investor behavior towards hydropower IPOs. This finding suggests that Nepalese investors prioritize returns and organizational governance over market risks, despite having significant concerns regarding idiosyncratic risk. The analysis also reveals significant associations between investor behavior and sociodemographic variables like age, education, occupation, and primary investment objectives (P < 0.05). This study offers valuable insights and implications for investors seeking to align investments with their goals. Hydropower developers should prioritize investor protection and transparency, while regulators must enhance disclosures, shareholder accountability, and project oversight.

How does corporate culture affect IPO price formation?

We examine the relationship between corporate culture and initial public offering (IPO) price formation. Using a sample of 935 US IPOs and data on corporate culture from Li et al. (2021b), we find that IPOs of strong culture firms are associated with more positive price revisions and higher initial returns, i.e., more underpricing. These findings hold using an alternative measure of corporate culture, matched samples, and a large set of control variables. Consistent with key theories, the effects appear to be driven by underwriters deliberately compensating investors for revealing information about their perceptions of the firm's culture during bookbuilding.

Gender Diversity on Commissioner Board and Decision Making: Evidence Using Capital Raised Through IPOs

This study aims to analyze the influence of the presence of women in the board of commissioners’ structure on the funds allocating decisions to finance various company investment opportunities sourced from corporate actions, such as an initial public offering (IPO). Service companies, especially the financial sector became a vast field for a woman, therefore, the financial sector that has conducted IPOs on the Indonesia Stock Exchange (IDX) for the past 21 years was selected as a research sample. The analytical tool used is multiple linear regression with OLS method which examines cross-sectionally the effect of the presence of women in 53 companies. This result shows that the presence of women on the board of commissioners affects the decision-making process on the amount of funding allocation for the company's investment opportunities. Their existence minimizes the allocation of IPO funds to finance various company investment opportunities in the future. Thus, gender studies in IPO corporate actions, especially in developing countries, are still very rarely studied. Women are known to have a short-term problem-solving perspective and are less confident than men, but they are more careful when making decisions. Despite the dominating nature of prudence, women can reduce the potential for financial distress due to risky investment decisions by choosing the decision to hoard funds in the form of cash to strengthen working capital.

Effects of listing on the financial behavior of private-sector firms in China

In China, non-listed private-sector firms are discriminated against in terms of access to funding. Initial public offerings (IPOs) change this situation and, likely, the investment behavior of such firms. Utilizing data from 1998 to 2020 regarding both listed and never-listed firms, we establish the causal impact of listing on the financial behavior of private-sector firms in China. Our results are as follows. First, IPOs cause private-sector firms to increase not only newly issued equity financing but also their reliance on debt finance. Second, IPOs enable firms to enjoy lower interest rates on bank loans than never-listed firms. Third, IPOs motivate private-sector private firms to accelerate investment in assets. This generates increased demand for funding sources. Fourth, IPOs increase private-sector firms' reliance on debt finance and accelerate their investment, and this occurs through two mechanisms that we elucidate. Our results suggest that tight regulation on approvals for IPOs of private-sector firms with good prospects should be loosened.

Analysis of The Effect of Funding Strategy on The Company’s Financial Performance at PT Jasamarga Transjawa Tol


 
 
 This research aims to investigate the implications of funding strategies employed by PT Jasa Marga and its subsidiary PT Jasamarga Transjawa Tol on their financial performance. With the Indonesian government's increased investment in toll road infrastructure, Jasa Marga, a State-Owned Enterprise, has undertaken expansive endeavors, augmenting investments from IDR 24.8 trillion in 2018 to IDR 78.6 trillion by 2022. However, this escalation in investment levels also brings forth heightened liabilities, predominantly stemming from reliance on debt, particularly bank loans, in addition to equity. Such a scenario presents challenges in managing payment obligations and, if not handled adeptly, could imperil Jasa Marga's financial performance. Consequently, strategies aimed at bolstering the company's capital structure are slated for implementation in 2023. This exploration aims to assess how these financial strategies and the debt-equity balance influence company value and financial health, drawing on frameworks like the Pecking Order Theory. It seeks to comprehend the ramifications of internal and external financing on the company's solvency, as measured by ratios such as Debt Equity Ratio (DER), Debt Ratio, and Interest Coverage Ratio (ICR). The literature review delves into various financial strategies such as crowdfunding and Initial Public Offering (IPO), elucidating their motivations and repercussions on companies, with a specific focus on aspects like information asymmetry and changes in post-IPO performance. This research integrates theories, practical strategies, and financial metrics to derive meaningful, data-driven conclusions aimed at optimizing capital structure and enhancing financial stability. It offers valuable insights to stakeholders and facilitates improved financial decision-making processes within the company.
 
 

The information content of SPAC securities

Special Purpose Acquisition Companies (SPACs) have taken the initial public offering (IPO) market by storm. SPACs were 2/3 of all IPOs in 2021 and have continued to be a significant portion of IPOs since. A unique feature of SPACs is that the SPAC shares trade for weeks/months after a target has been announced, but before the proposed deal is consummated, giving a window into the market's sentiment towards the deal terms. Although Shareholders' redemption option reduces the informativeness of SPAC shares, SPAC rights (& warrants) provide a window into the eventual pricing of SPAC shares post de-SPAC because they aren't redeemable. We explore the informativeness of the portfolio of SPAC securities and find new insight into the pricing of these transactions. Prices of rights and warrants are far more informative about the value of a proposed business combination than share prices, and warrant prices are predictive of future redemptions.

Финансово-правовое регулирование процедуры первичного публичного и вторичного размещения ценных бумаг в Российской Федерации

The article analyzes the initial public offering (IPO) of shares in comparison with pre-IPO and SPO. Various doctrinal points of view on the IPO procedure are revealed. The author reveals the features of the financial and legal regulation of IPO, which is carried out by the mega-regulator in the financial market – the Bank of Russia. It is also noted in the work that the further development of the Institute of digital Financial assets (CFA) will significantly use its capabilities for public placement of assets in the Russian Federation.

Stock exchange oversight and investor quotes: Evidence from initial public offering comment letters in China

This study investigates whether and how changes in the information environment resulting from the issuance of comment letters during the initial public offering (IPO) process, as is newly implemented by stock exchanges in China, affect IPO quotes from institutional investors. We find a significant and negative association between IPO review intensity, measured as the number of comment letter questions issued by the stock exchange or the change in length between the initial and final prospectuses, and the number of quotes received by the firm from institutional investors. Further analyses reveal that IPO review intensity is negatively associated with the divergence of quotes received from institutional investors. Additional analyses reveal that institutional investors tend to pay more attention to questions indicating regulatory oversight than to questions requesting factual information disclosure. Overall, the findings of this study provide support for the hypothesis that the issuance of comment letters, as a part of the interaction between stock exchanges and equity-issuing firms during the IPO process, plays a significant oversight role and consequently influences investor decision-making.

THE EFFECT OF CORPORATE GOVERNANCE ON UNDERPRICING DURING THE INITIAL PUBLIC OFFERING

Initial public offering (IPO) is the main gateway for private institutions to adapt to public business and list company shares on the capital market for trading. By conducting an IPO, an institution can obtain funding from the public to pay for company expansion. One phenomenon that is often encountered by business actors conducting an IPO is an underpricing situation, namely a situation where the share price offered in the primary market is lower than the share price in the secondary market. As a manifestation of the company's obligation to use public price ranges, it is the responsibility of companies across society to manage and use public funds well, transparently and accountably, so that good corporate governance can be implemented well. The aim of this research is to analyze the influence of corporate governance on underpricing in organizations conducting IPOs on the Indonesian Capital Market for the 2017-2022 period. Corporate governance is measured through the scale of the board of commissioners, independence of the board of commissioners, management ownership and institutional share ownership. There are 305 groups providing initial public services and indexed on the IDX throughout the 2017-2022 period. Random sampling techniques are used to select samples. The analysis uses a robust linear regression evaluation method. The findings of this research show that the magnitude of the board of commissioners has no effect on underpricing, the of independence commissioners has an impact on underpricing, while management proportion ownership and institutional proportion ownership have a fairly large negative effect on underpricing.

Pengaruh Leverage dan Likuiditas terhadap Tingkat Underpricing Perusahaan non Keuangan yang IPO

The purpose of this study is to examine the impact of leverage and liquidity on the level of underpricing in non-financial companies that conducted Initial Public Offerings (IPOs) on the Indonesia Stock Exchange (IDX) between 2019 and 2022. Purposive sampling method was used in sampling this study. The study population consisted of 218 companies that conducted IPOs in that time frame, while the research sample used amounted to 179 companies. The data analysis technique applied is multiple linear regression. The results showed that there was no significant influence between leverage measured by Debt To Asset Ratio (DAR) and liquidity measured by Current Ratio (CR) on underpricing.

UNDERPRICING SIGNALS: EXPLOITATION OF DAR VARIABLES (DEBT TO ASSET RATIO)

The analysis of DAR (Debt to Asset Ratio) associated with the level of underpricing movement is the main focus in this study process. This study adopts a quantitative approach and relies on secondary data with a focus on explanatory research. The utilisation of purposive sampling method in sample selection allows the study to focus on 77 issuers over a significant period from 2021 to 2022. The uniqueness of this study lies in the use of the latest data and a sample that reflects the situation during the period. In analysing the data, linear regression with the support of EViews software is used as the main tool to test the hypothesis. The data source is obtained from the information of companies conducting initial public offerings and accessed through the Indonesia Stock Exchange website. The calculation results show a significant impact of the DAR variable on the level of movement of IPO stock underpricing. The positive coefficient on the DAR variable indicates that an increase in the DAR value has the potential to increase the level of movement of IPO stock underpricing, and vice versa.

ANALISIS FAKTOR-FAKTOR YANG MEMPENGARUHI UNDERPRICING SAHAM PADA PENAWARAN UMUM PERDANA

This study aims to examine and analyze what factors influence stock underpricing in companies that carry out Initial Public Offerings. The research method used in this research is descriptive method and verification method. The population in this study are all companies that are conducting Initial Public Offerings in 2019-2021. The samples obtained using quota sampling are 145 companies. The analysis technique used is multiple linear regression. Data processing uses the IBM SPSS 20 program The results of this study indicate that profitability, market value, liquidity, and firm age has a negative and significant effect on stock underpricing. Capital structure has a positive and significant effect on stock underpricing. All variables in this study have significant influence on stock underpricing. Then the regression estimation results show that the predictive ability of the 5 independent variables on stock underpricing is 73%, while the remaining 27% is influenced by other factors outside the model which are not included in this analysis. Keywords: Profitability, Market Value, Capital Structure, Liquidity, Firm Age, Underpricing.

Identification of Underpricing FactorsInitial Public Offering Manufacturing Sector on The Indonesia Stock Exchange

Purpose – This study aims to prove and analyze the effect of Return On Assets (ROA), Inflation Rate, Earning Per Share (EPS) and Debt to Asset Ratio (DAR) on Underpricing of shares in manufacturing companies during the initial public offering (IPO) on the Indonesian Stock Exchange in 2017-2021 years.
 Methodology/approach – This research design is quantitative with an associative approach. The population in this study were all manufacturing companies that experienced stock underpricing in 2017 – 2021, while the samples used in this study were 53 manufacturing companies that met certain criteria in the study period. The sampling technique used purposive sampling method. The data analysis used is multiple linear regression analysis.
 Findings – The results of this study indicate that Earning Per Share (EPS) has a significant negative effect on underpricing and the Inflation Rate has a significant positive effect on underpricing, while Return On Assets (ROA) and Debt to Asset Ratio (DAR) have no effect on underpricing.
 Novelty/value – The high or low value of Return on Assets and debt to asset ratio does not significantly affect stock underpricing during the initial public offering. The value of earnings per share and inflation greatly affects the underpricing of shares in manufacturing companies during the initial public offering

Timing the transition: gender diversity’s role in family IPOs

PurposeThis study investigates the relationship between board gender diversity (BGD) and the time to Initial Public Offering (IPO), which stands as an entrepreneurially risky choice, particularly challenging in family firms. We also investigate the moderating role of family ownership dispersion (FOD).Design/methodology/approachWe draw on an integrated theoretical framework bringing together the upper echelons theory and the socio-emotional wealth (SEW) perspective and on hand-collected data on a sample of Italian family IPOs that occurred in the period 2000–2020. We employ ordinary least squares (OLS) regression and alternative model estimations to test our hypotheses.FindingsBGD positively affects the time to IPO, thus, it increases the time required to go public. FOD negatively moderates this relationship. Our findings remain robust with different measures for BGD, FOD, and family business definition as well as with different econometric models.Originality/valueThe article develops literature on family firms and IPO and it enriches the academic debate about gender and IPOs in family firms. It adds to studies addressing the determinants of the time to IPO by incorporating gender diversity and the FOD into the discussion. Finally, it contributes to research on women and outcomes in family firms.

Is a tax deductibility of R&D investment always good for a firm? The case of IPO underpricing

We examine the impact of an R&D tax deduction policy on initial public offering (IPO) underpricing. Our findings suggest that IPO firms subject to the tax deduction policy (treatment firms) exhibit higher underpricing than those not subject to the tax deduction policy (control firms). The results are robust to alternative metrics of underpricing. We attribute to the worsening information asymmetry and agency conflicts in the treatment firms relative to the control firms due to an increase cashflows from tax savings. Additional analysis suggests that the effect is more salient for IPO firms with high information asymmetry and severe agency conflicts.

KILLER ACQUISITIONS AND BEYOND: POLICY EFFECTS ON INNOVATION STRATEGIES

AbstractThis article provides a theory of strategic innovation project choice by incumbents and start‐ups which serves as a foundation for the analysis of acquisition policy. We show that, in spite of countervailing incentives on incumbents and entrants, prohibiting acquisitions has a weakly negative overall innovation effect. We provide conditions determining the size of the effect and conditions under which it is zero. We further analyze the effects of less restrictive policies, including merger remedies and the tax treatment of acquisitions and initial public offerings. Such interventions tend to prevent acquisitions only if the entrant has sufficiently high stand‐alone profits.

Unstable platforms: Uber’s business model and the challenge of organisational legitimacy

ABSTRACT Lauded as the poster child of the sharing economy, the success of Uber’s business model was once viewed as inexorable. However, a disastrous Initial Public Offering and a series of legal rulings since have led some to question whether it has a viable model at all. This changing sentiment raises important questions about how we define a business model and understand the determinants of its success and failure. Rejecting the dominant diagnostic approach, this paper synthesises critical accounting work on business models as narratives with Suchman’s concept of organisational legitimacy. We argue that business models are narratives articulated by firms in order to achieve both pragmatic and moral legitimacy. In contexts where stakeholder interests diverge, this requires careful framing in order to foreground certain economic and moral representations whilst omitting others. Business model narratives are consequently partial, unstable and open to contestation. Applying this formulation to Uber, we argue that its pragmatic legitimacy was contingent upon a particular set of conjunctural conditions and the undisclosed exploitation of legal grey areas in order to grow at scale. We highlight the tensions that emerge when those undisclosed practices become a focal point for social mobilisation and understand Uber's recent problems as emerging from external challenges to the moral legitimacy of its business model narrative. The paper contributes to accounting research on business models and legitimacy and presents a revisionist account which positions platforms as fragile economic and moral entities dependent on conjunctural institutional and capital market arrangements, rather than heroic technological disruptors.

Impact of Macroeconomic Factors on Initial Public Offer: An Analytical Study of Investor’s Decision

The financial performance and economic stability of any listed company in India will be measured using various financial and accounting methods. The premise of such matters starts with IPOs (Initial Public Offerings) being issued at the right time and suitable period. Before launching any IPO, a particular company will study a lot of macro and micro economic factors of the concerned region and their impact on IPO success rate. An IPO is a giant leap for a company as it gives access to raising colossal capital. This enhances the ability of a company to expand exponentially. This paper attempted to study several macroeconomic factors that impact Uttar Pradesh's state in the Agra division districts (Agra, Firozabad, Mathura, and Mainpuri) and the investor purchase behavior of different IPOs. Additionally, the research examines four factors namely GDP, Unemployment, Inflation, and Interest rates that are comparatively more significant in a long-run relation. This research found that GDP, inflation rate, and interest rate substantially impact IPO purchase decisions. However, the rate of unemployment has been discovered to have no significant effect on investors' IPO purchase decisions.

Analisis Perbandingan Kinerja Keuangan Perusahaan Sebelum dan Sesudah Initial Public Offering (IPO) pada Perusahaan yang Listing di BEI

The purpose of this study was to compare the financial results of IDX companies before and after their IPO to determine if there is a correlation between the two. Purposive sampling was employed to choose a subset of the study population (n=42) from among the full (n=51) population. All information for this study comes directly from the IDX's official website, making it a secondary data source. A company's financial results before and after its initial public offering (IPO) serve as independent and dependent variables, respectively. While a documentation study is utilized to collect data. A comparison of the company's liquidity ratio, leverage ratio, profitability ratio, and activity ratio before and after its IPO was found to be statistically significant (P .05) or not (P >.05), respectively, using the Wilcoxon Signede-rank test method.
 Keywords: Initial Public Offering (IPO), Liquidity Ratio, Leverage Ratio, Profitability Ratio, and Activity Ratio, Financial Performance.

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.