The new capital raised in IPOs

Document Type

Article

Department or Administrative Unit

Accounting

Publication Date

9-10-2017

Abstract

Purpose

The purpose of this paper is to answer the following three questions about the new capital raised in initial public offerings (IPOs): why do some IPO companies raise a lot of new capital while some others do not? Where do the IPO companies use the new capital they raise in IPOs? How does the use of new capital affect the operating performance of IPO companies?

Design/methodology/approach

Matching firm approach, univariate and regression tests.

Findings

This paper finds that companies with higher research and development (R&D) spending, higher capital expenditure, lower working capital and more long-term debt tend to raise more capital in IPOs. These firms also spend more on R&D and capital expenditure. The results also suggest that the more the new capital firms raise in IPOs, the lower operating performance they have in subsequent years. However, firms spending more new capital on R&D and capital expenditure seem to perform better.

Originality/value

These results help us understand the behavior of IPO firms.

Comments

This article was originally published in Managerial Finance. The full-text article from the publisher can be found here.

Due to copyright restrictions, this article is not available for free download from ScholarWorks @ CWU.

Journal

Managerial Finance

Rights

Copyright © 2017, Emerald Publishing Limited

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