POST‐IPO OPERATING PERFORMANCE IN BANGLADESH
Keywords:
IPO, Operating Performance, Bangladesh.
Abstract
This study attempts to investigate the change in the operating performance of firms as they go from private to public ownership. Using the data of all the non-financial firms, which floated initial public offerings (IPOs) from 2008 to 2015, this study finds that there is a significant decline in operating performance as measured by ROA, asset turnover, ROS, and OCFTA after the IPO and the decline continues for next two to three years with the highest deterioration of operating performance being observed in the immediate next year of IPO. Moreover, when the study uses age, debt ratio, sales, capital expenditure, and IPO event to explain the variation of the operating performance of IPO firms over time, it finds that IPO event negatively affects all measures of operating performance. Finally, the study finds that deterioration of the post-IPO operating performance is more pronounced for firms offering their securities with premium than firms offering securities without premium.
JEL Classification Codes: G11, G12, G32.
References
Ahmad-Zaluki, N. A., Campbell, K., & Goodacre, A. (2011). Earnings management in Malaysian IPOs: The East Asian crisis, ownership control, and post-IPO performance. The International Journal of Accounting, 46(2), 111-137.
Aggarwal, R., & Rivoli, P. (1990). Fads in the Initial Public Offering Market?. Financial Management, 19(4), 45-57.
Balatbat, M. C., Taylor, S. L., & Walter, T. S. (2004). Corporate governance, insider ownership and operating performance of Australian initial public offerings. Accounting & Finance, 44(3), 299-328.
Barber, B. M., & Lyon, J. D. (1996). Detecting long-run abnormal stock returns: The empirical power and specification of test statistics. Journal of Financial Economics, 41(3), 359-399.
Brav, A., & Gompers, P. A. (1997). Myth or reality? The long‐run underperformance of initial public offerings: Evidence from venture and nonventure capital‐backed companies. The Journal of Finance, 52(5), 1791-1821.
Bruton, G. D., Filatotchev, I., Chahine, S., & Wright, M. (2010). Governance, ownership structure, and performance of IPO firms: The impact of different types of private equity investors and institutional environments. Strategic Management Journal, 31(5), 491-509.
Cai, J., & Wei, K. J. (1997). The investment and operating performance of Japanese initial public offerings. Pacific-Basin Finance Journal, 5(4), 389-417.
Cai, J., & Loughran, T. (1998). The performance of Japanese seasoned equity offerings, 1971–1992. Pacific-Basin Finance Journal, 6(5), 395-425.
Chan, K., Wang, J., & Wei, K. J. (2004). Underpricing and long-term performance of IPOs in China. Journal of Corporate Finance, 10(3), 409-430.
Dawson, S. M. (1987). Secondary stock market performance of initial public offers, Hong Kong, Singapore and Malaysia: 1978–1984. Journal of Business Finance & Accounting, 14(1), 65-76.
Degeorge, F., & Zeckhauser, R. (1993). The Reverse LBO Decision and Firm Performance: Theory and Evidence. The Journal of Finance, 48(4), 1323-1348.
Dsebd.org. (2019). Dhaka Stock Exchange. Retrieved from https://www.dsebd.org
Fan, J. P., Wong, T. J., & Zhang, T. (2014). Politically connected CEOs, corporate governance, and the post‐IPO performance of China's partially privatized firms. Journal of Applied Corporate Finance, 26(3), 85-95.
Hossain, M. S., Hossain, M. A., & Amin, S. (2016). An Empirical Analysis of the Relationship between Monetary Policy Stance and Stock Price in Bangladesh. Bangladesh Development Studies, 39(1-2), 27-57.
Ibbotson, R. G., & Jaffe, J. F. (1975). Hot issue” markets. The journal of finance, 30(4), 1027-1042.
Haque, R., & Imam, M. O. (2017). Long-run Price Performance of Initial Public Offerings in Bangladesh. Research Journal of Finance and Accounting, 8(4), 65-79.
Islam, M. S., Uddin, M. M., & Ahmad, S. (2002). The operating performance of firms conducting seasoned equity offerings In Bangladesh. Dhaka University Journal of Business Studies, 23(2).
Jain, B. A., & Kini, O. (1994). The post‐issue operating performance of IPO firms. The Journal of Finance, 49(5), 1699-1726.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Kao, J. L., Wu, D., & Yang, Z. (2009). Regulations, earnings management, and post-IPO performance: The Chinese evidence. Journal of Banking & Finance, 33(1), 63-76.
Kim, K. A., Kitsabunnarat, P., & Nofsinger, J. R. (2004). Ownership and operating performance in an emerging market: evidence from Thai IPO firms. Journal of Corporate Finance, 10(3), 355-381.
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of accounting and economics, 39(1), 163-197.
Krishnan, C. N. V., Ivanov, V. I., Masulis, R. W., & Singh, A. K. (2011). Venture capital reputation, post-IPO performance, and corporate governance. Journal of Financial and Quantitative Analysis, 46(5), 1295-1333.
Kutsuna, K., Okamura, H., & Cowling, M. (2002). Ownership structure pre-and post-IPOs and the operating performance of JASDAQ companies. Pacific-Basin Finance Journal, 10(2), 163-181.
Loughran, T. (1993). NYSE vs NASDAQ returns: Market microstructure or the poor performance of initial public offerings?. Journal of Financial Economics, 33(2), 241-260.
Loughran, T., & Ritter, J. R. (1995). The new issues puzzle. The Journal of Finance, 50(1), 23-51.
Lukose, P. J., & Rao, S. N. (2003). Operating performance of the firms issuing equity through rights offer. Vikalpa, 28(4), 25-40.
Lyandres, E., Sun, L., & Zhang, L. (2008). The new issues puzzle: Testing the investment-based explanation. The Review of Financial Studies, 21(6), 2825-2855.
Michel, A., Oded, J., & Shaked, I. (2014). Ownership structure and performance: Evidence from the public float in IPOs. Journal of Banking & Finance, 40, 54-61.
Mikkelson, W. H., Partch, M. M., & Shah, K. (1997). Ownership and operating performance of companies that go public. Journal of Financial Economics, 44(3), 281-307.
Pagano, M., Panetta, F., & Zingales, L. (1998). Why Do Companies Go Public? An Empirical Analysis. The Journal of Finance, 53(1), 27-64.
Pereira, T. P., & Sousa, M. (2017). Is there still a Berlin Wall in the post‐issue operating performance of European IPOs?. International Journal of Finance & Economics, 22(2), 139-158.
Rindermann, G. (2003). Venture Capitalist Participation and the Performance of IPO Firms: Empirical Evidence from France, Germany, and the UK. SSRN Electronic Journal.
Ritter, J. R. (1984). The "Hot Issue" Market of 1980. The Journal of Business, 57(2), 215-240.
Ritter, J. R. (1991). The Long-Run Performance of Initial Public Offerings. The Journal of Finance, 46(1), 3-27.
Sec.gov.bd. (2019). Bangladesh Securities and Exchange Commission. Retrieved from http://sec.gov.bd
Shukla, A. K., & Shaw, T. S. (2018). Operating Performance of Initial Public Offering Firms after Issue in India –A Revisit. Working Papers id:12701. eSocialSciences.
Wang, C. (2005). Ownership and operating performance of Chinese IPOs. Journal of Banking & Finance, 29(7), 1835-1856.
Aggarwal, R., & Rivoli, P. (1990). Fads in the Initial Public Offering Market?. Financial Management, 19(4), 45-57.
Balatbat, M. C., Taylor, S. L., & Walter, T. S. (2004). Corporate governance, insider ownership and operating performance of Australian initial public offerings. Accounting & Finance, 44(3), 299-328.
Barber, B. M., & Lyon, J. D. (1996). Detecting long-run abnormal stock returns: The empirical power and specification of test statistics. Journal of Financial Economics, 41(3), 359-399.
Brav, A., & Gompers, P. A. (1997). Myth or reality? The long‐run underperformance of initial public offerings: Evidence from venture and nonventure capital‐backed companies. The Journal of Finance, 52(5), 1791-1821.
Bruton, G. D., Filatotchev, I., Chahine, S., & Wright, M. (2010). Governance, ownership structure, and performance of IPO firms: The impact of different types of private equity investors and institutional environments. Strategic Management Journal, 31(5), 491-509.
Cai, J., & Wei, K. J. (1997). The investment and operating performance of Japanese initial public offerings. Pacific-Basin Finance Journal, 5(4), 389-417.
Cai, J., & Loughran, T. (1998). The performance of Japanese seasoned equity offerings, 1971–1992. Pacific-Basin Finance Journal, 6(5), 395-425.
Chan, K., Wang, J., & Wei, K. J. (2004). Underpricing and long-term performance of IPOs in China. Journal of Corporate Finance, 10(3), 409-430.
Dawson, S. M. (1987). Secondary stock market performance of initial public offers, Hong Kong, Singapore and Malaysia: 1978–1984. Journal of Business Finance & Accounting, 14(1), 65-76.
Degeorge, F., & Zeckhauser, R. (1993). The Reverse LBO Decision and Firm Performance: Theory and Evidence. The Journal of Finance, 48(4), 1323-1348.
Dsebd.org. (2019). Dhaka Stock Exchange. Retrieved from https://www.dsebd.org
Fan, J. P., Wong, T. J., & Zhang, T. (2014). Politically connected CEOs, corporate governance, and the post‐IPO performance of China's partially privatized firms. Journal of Applied Corporate Finance, 26(3), 85-95.
Hossain, M. S., Hossain, M. A., & Amin, S. (2016). An Empirical Analysis of the Relationship between Monetary Policy Stance and Stock Price in Bangladesh. Bangladesh Development Studies, 39(1-2), 27-57.
Ibbotson, R. G., & Jaffe, J. F. (1975). Hot issue” markets. The journal of finance, 30(4), 1027-1042.
Haque, R., & Imam, M. O. (2017). Long-run Price Performance of Initial Public Offerings in Bangladesh. Research Journal of Finance and Accounting, 8(4), 65-79.
Islam, M. S., Uddin, M. M., & Ahmad, S. (2002). The operating performance of firms conducting seasoned equity offerings In Bangladesh. Dhaka University Journal of Business Studies, 23(2).
Jain, B. A., & Kini, O. (1994). The post‐issue operating performance of IPO firms. The Journal of Finance, 49(5), 1699-1726.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Kao, J. L., Wu, D., & Yang, Z. (2009). Regulations, earnings management, and post-IPO performance: The Chinese evidence. Journal of Banking & Finance, 33(1), 63-76.
Kim, K. A., Kitsabunnarat, P., & Nofsinger, J. R. (2004). Ownership and operating performance in an emerging market: evidence from Thai IPO firms. Journal of Corporate Finance, 10(3), 355-381.
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of accounting and economics, 39(1), 163-197.
Krishnan, C. N. V., Ivanov, V. I., Masulis, R. W., & Singh, A. K. (2011). Venture capital reputation, post-IPO performance, and corporate governance. Journal of Financial and Quantitative Analysis, 46(5), 1295-1333.
Kutsuna, K., Okamura, H., & Cowling, M. (2002). Ownership structure pre-and post-IPOs and the operating performance of JASDAQ companies. Pacific-Basin Finance Journal, 10(2), 163-181.
Loughran, T. (1993). NYSE vs NASDAQ returns: Market microstructure or the poor performance of initial public offerings?. Journal of Financial Economics, 33(2), 241-260.
Loughran, T., & Ritter, J. R. (1995). The new issues puzzle. The Journal of Finance, 50(1), 23-51.
Lukose, P. J., & Rao, S. N. (2003). Operating performance of the firms issuing equity through rights offer. Vikalpa, 28(4), 25-40.
Lyandres, E., Sun, L., & Zhang, L. (2008). The new issues puzzle: Testing the investment-based explanation. The Review of Financial Studies, 21(6), 2825-2855.
Michel, A., Oded, J., & Shaked, I. (2014). Ownership structure and performance: Evidence from the public float in IPOs. Journal of Banking & Finance, 40, 54-61.
Mikkelson, W. H., Partch, M. M., & Shah, K. (1997). Ownership and operating performance of companies that go public. Journal of Financial Economics, 44(3), 281-307.
Pagano, M., Panetta, F., & Zingales, L. (1998). Why Do Companies Go Public? An Empirical Analysis. The Journal of Finance, 53(1), 27-64.
Pereira, T. P., & Sousa, M. (2017). Is there still a Berlin Wall in the post‐issue operating performance of European IPOs?. International Journal of Finance & Economics, 22(2), 139-158.
Rindermann, G. (2003). Venture Capitalist Participation and the Performance of IPO Firms: Empirical Evidence from France, Germany, and the UK. SSRN Electronic Journal.
Ritter, J. R. (1984). The "Hot Issue" Market of 1980. The Journal of Business, 57(2), 215-240.
Ritter, J. R. (1991). The Long-Run Performance of Initial Public Offerings. The Journal of Finance, 46(1), 3-27.
Sec.gov.bd. (2019). Bangladesh Securities and Exchange Commission. Retrieved from http://sec.gov.bd
Shukla, A. K., & Shaw, T. S. (2018). Operating Performance of Initial Public Offering Firms after Issue in India –A Revisit. Working Papers id:12701. eSocialSciences.
Wang, C. (2005). Ownership and operating performance of Chinese IPOs. Journal of Banking & Finance, 29(7), 1835-1856.
Published
2021-05-29
How to Cite
Hossain, M. S., & Khan, M. S. (2021). POST‐IPO OPERATING PERFORMANCE IN BANGLADESH. International Journal of Accounting & Finance Review, 7(1), 1-16. https://doi.org/10.46281/ijafr.v7i1.1149
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2021 Md. Sajib Hossain, Muhammad Saifuddin Khan
This work is licensed under a Creative Commons Attribution 4.0 International License.
